Where next for UK pensions policy?

The credit crunch threw some light on the parlous state of UK pensions, both private and public sector. Now the focus has shifted to what actuaries, finance directors, trustees and the government can actually do when the liabilities of a pension scheme begins pulling them under.

Days after the coalition government hammered out its plans for the future, a panel of pensions experts met various FDs at the London Stock Exchange to discuss ideas on where to go next.

Kevin Wesbroom, UK lead for global risk services at event sponsor Hewitt Associates, kicked off by saying the election had put pensions in the firing line as the government looks to plug the hole in the public coffers.

Wesbroom accused successive governments of dragging their feet on pensions, before flagging up sweeping, but potentially damaging, proposals, such as the abolition of compulsory retirement, floated by the new government. He also highlighted the incoming National Employment Savings Trust (Nest) measures.

“You, the employer, will put in three percent, the individual four percent and the government will put in one percent by way of tax relief,” says Wesbroom. “The New Employer Obligations auto-enrol people in pension plans. These have been watered down and will be phased in by 2018 – but this still needs to be thought about.”

His main concern rested on how pensions tax relief withdrawals had not been mentioned by the incoming government.

The coalition government is now looking at alternatives to the reductions, because it will bring significant complications.

The millstone of public sector pensions was also on Wesbroom’s agenda.

“The good news is that somebody has decided we should stop paying for public sector pensions,” he said. “There’s a big disparity if you look at the difference in terms of the quality of public sector pensions and the quality of private sector pensions. The private sector degraded their pensions massively over the past 10 years.”

Scrapping compulsory annuitisation, he thought, would also put FDs under pressure, a move later confirmed in the Budget.

“You won’t be able to sack your workforce when they reach retirement age, meaning the trend for these schemes to die out is set to continue,” he said.

Jackie Daldorph, managing principal at Hewitt Associates, pointed out that things were not much better for final salary schemes.