OK, so even I am not that obsessed with pensions, love it though I may. I’m also a realist about how long it may still take. But there’s no denying that pensions have been largely ignored recently with all the hoo-ha in the UK over Brexit and the general election. The Pension Schemes Bill died when Parliament dissolved for the election, and even that failed to deal with many of the burning issues of the day. But we have a new Government now, so what is on my Christmas wish list?
Allow trustees to invest for good
Pension trustees are now required to reveal their investment policy on climate change and good governance, but their actual investment powers are really rather limited when it comes to investing for the greater good. That’s because of the Cowan v Scargill case, where Arthur Scargill of the National Union of Mineworkers wanted the coal industry pension scheme to avoid investing in competitor fuels and overseas businesses. The court told the trustees to focus on investing to yield the best financial return for beneficiaries. That was in 1984 and nothing much has changed since.
It makes it tricky to invest in businesses designed to have a positive impact on society, but it is clear that MPs expect pension funds to be part of the move to climate-friendly investment. So, a thought – is it time for the Government to empower trustees to explore impact investment?
Get rid of tax obstacles
You can’t solve everything in one go, but surely we can solve the tax challenges on GMP equalisation? Equalisation of pension benefits as between men and women for the effect of unequal statutory guaranteed minimum pensions will lead to small back-payments and a few tweaks to benefits. It really isn’t going to be life-changing for most people. At most it might also lead to some benefit structure changes using GMP conversion. The trouble is that the current tax regime can’t cope with any of it and HMRC is struggling to react. And yet back in the summer the-then Pensions Minister was telling trustees to get on with equalisation. They will, as soon as the Government takes GMP equalisation changes outside the current tax restrictions.
While they’re at it, I’d also like HMRC to stop penalising split pension transfers. Losing tax protections if AVCs are transferred in one direction with main scheme benefits being left behind will block the consolidation of pensions that the Government was promoting, and potentially disadvantage members.
Relax on chair’s statements
Transparency on costs in defined contribution schemes is healthy and should be encouraged. But that doesn’t mean that the Pensions Regulator should have to fine trustees over small details in the annual trustee chair’s statement. The current enforcement law isn’t risk-based and it is not actually helping members. So I’d like to see the Regulator being given more discretion in policing chair statements, to use a scarce resource more efficiently.
Sort out GMP conversion
Back to my favourite topic. We have laws in place to allow employers to change the structure of pension schemes to get rid of the out-dated and discriminatory requirements which still apply to a proportion of many individuals’ pre-1997 pension benefits. However even the Department for Work and Pensions concedes they don’t quite work as drafted and was planning to make some changes. Please can we have them now? They weren’t in the 2019 Pension Schemes Bill, but I am crossing my fingers for them to appear when and if the Bill re-emerges.
And yes, I have been good*.
* For a given value and according to parameters I have determined as appropriate to the situation.