With the prospect of a Labour government taking power in 2024 or possibly even sooner, the pensions industry should start preparing itself for potential changes in Whitehall. After 12 years out of office, there is now a very real chance that Labour’s shadow pensions minister, Matt Rodda, could be shaping the policies that influence the retirement outcomes of the nation.
Since 2010 we have seen Sir Steve Webb at the helm through the coalition government, followed by Baroness Ros Altmann, Richard Harrington and Guy Opperman all taking the pensions minister role, a brief whose status has been elevated and diminished at different points in time. The recent revolving doors in the corridors of power have seen Alex Burghart take a 38-day stint in the role, with Laura Trott now holding the brief.
That 12-year period has seen defined contribution (DC) pensions become the go-forward vehicle for retirement savings for virtually all private sector workers, courtesy in no small part to Labour’s auto- enrolment policy, which was given a shot of adrenalin by George Osborne’s 2015 pension freedoms.
With Labour now clearly on a war footing, Rodda minister is in listening mode. He says he wants to start a dialogue with the industry on how to boost longer term retirement saving In the UK, while addressing key issues facing the pensions industry.
Rodda, who has previously worked as a civil servant and as a journalist in local newspapers, says improving pension provision for women is a priority, as is addressing some of the drawbacks arising from pension freedoms.
He says: “While some people have benefits from the pension freedom rules, it had led to poor financial decision-making in some cases, with some savers falling prey to scams.”
Rodda is keen to reassure the industry that Labour is interested in listening to suggestions on how legislation could improve the pensions sector, and what lessons might be learned from the success of auto-enrolment providers like Nest and The People’s Pension, and also how this ‘third way’ might be adapted to other areas of policymaking.
He adds that the Labour Party wants to promote long term economic growth and remains committed to the “long-term responsible management of the public finances”. He says businesses across the economy, including those in the pensions and savings arena, want stability and consistency of regulation so they can plan for the future and grow.
“This industry is hugely important to the UK and to its people. Pensions have significant size and importance, with over £2.5trillion invested in occupational pensions schemes in UK, and a large proportion of that is in master trusts and group personal pension.
“This sector is already growing – the [DC sector] is £500bn and expected to reach £1 trillion by the end of the decade. That matters to people – these are the savings of many millions of people. The Labour Party is very much into encouraging this so that people can enjoy a decent retirement,” he says.
“As the sector grows, it is important to understand how growth is happening, and which groups of society potentially benefit from your work and the prospects offered to them. I’m particularly interested in those who have not fully benefited from having good pensions in past, particularly women and younger people, and other groups.”
Like pension ministers past and present, Rodda wants to see pension savings used for positive social purposes.
“Focusing on saving for the future is a very important part of our economic future for the country as a whole. I’m really interested in how savings can be used for social good, so for example looking at how auto-enrolment can support green energy, social housing and other social good factors and how it can produce a good rate of return for pension savers, industry and society as a whole. I do realise however that this is not easy,” says Rodda.
While Rodda is light on detail as to the sorts of pension policies that a Labour Government would introduce, he is keen to portray his party as a partner of stable economic growth and a friend of business. Labour is clearly attempting to paint a contrast with former Prime Minister Boris Johnson’s famous ‘F*** business’ attitude, though how this will be achieved in the arena of pensions is not yet clear.
“In terms of the wider picture of us as official opposition – we are committed to encouraging fair, long-term growth across the economy. One of the sad hallmarks of the current government is its tendency to lurch from crisis to crisis. Our approach is different, we want to listen to business more and address a range of concerns affecting businesses across the economy — in order to bolster supply chains, to try to make Brexit work and move away from a trickle down approach. While the current government is dusting off the same old policies that got us into this mess in the first place the Labour is very much about looking to the future.”
Rodda says areas that his party are looking at include ESG, costs, economies of scale, small pots and the impact of the cost-of-living crisis on pension saving. Collective DC and dashboards are also areas he is looking to hear from industry professionals on.
A key priority of any Labour challenge for government is persuading the electorate that they can be trusted with the economy. Given the extraordinary events of the last two months, fiscal stability is an obvious mantra, and given the recent chaos in the LDI sector, something pensions professionals clearly want to hear.
Rodda says: “I would like to reassure you we are committed to having strong fiscal rules to protect and grow the economy. Sadly, this government has messed market around. It is an unpreceded and damning indictment that the Bank of England has had to intervene to reassure markets. We will operate following rules where we only borrow to invest, and in partnership with business will get economy going. A crucial component is to create more good jobs and decent wages across the country which will have impact on people ability to save into a pension.”
Rodda reiterated his party’s support for the state pension triple lock.
“I am also very aware that many UK pensioners are not claiming Pension Credit – we would like to do more to support that to ensure people get a decent income in retirement. There is a large amount not being claimed, we think there are a million people not claiming what they are entitled to,” he says.
The thorny issue of advice and guidance is also in Rodda’s sights. “This is an issue of great interest to me, looking at the quality of advice and guidance offered to pensions savers as they are approaching retirement. There have been some positive developments in this area, but there is scope for much more. It seems to me the government can do more to signpost existing services, as well as improving quality of advice. I would welcome thoughts from the industry on how we can do this,” he says.
We still may have two years until a General Election and Rodda is not giving away any policy clues just yet. Instead he is operating an open door policy, looking to absorb what stakeholders across the sector have to say and fashioning it to align with his party’s principles.
Rodda says: “I am keen to build a dialogue, keen to listen and engage – we have a really interesting set of issues that need addressing and we want to work with industry on the best ways to achieve this.”