This week’s guest on The Professional Investment Podcast is Steve Webb, ex-pensions minister and partner at LCP. He chose to talk about the FT’s story that UK ministers gain powers to force pension funds to invest in British companies.
After ping-ponging between the House of Commons and Lords, last week the Pensions Scheme Bill became the Pensions Scheme Act. With the industry concerned about the government’s ability to force pension schemes to invest in the UK, Steve explains what powers the Act contains.
Steve also outlines the next stages for the act and how more consultations are likely to follow as policy makers put in place the regulations and statutory instruments needed to turn the act into legislation.
While the Pensions Scheme Act is wide-ranging, it doesn’t address any changes to the state pension age even though a review is happening. Steve explained that’s because the government does not want any chance of having to take WASPI women’s claims into account and to have to make a big pay-out.
The Act will have wide-ranging consequences for how pension schemes invest whether they are closed or open defined benefit schemes as well as auto-enrolled pension schemes.
Steve welcomes the new rules which will allow providers of contract-based legacy DC schemes to shift these members into lower cost and more effective investment funds. He also highlighted the proposals which will allow DB schemes with surpluses to invest those funds.
But he did highlight his concerns about the introduction of the value-for-money framework which, in combination with the consolidation of DC schemes, could result in a more boring investment universe with pension providers clustering around the same portfolio design.
Finally, we discussed how the government could address the lack of pension provision among the self-employed which has been declining rapidly.
Steve said it made sense to use HMRC as the common touchpoint of all self-employed people and for the government to incentivise investment by providing a lump sum and asking Martin Lewis to broadcast this information to his millions of followers.
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