Reynolds does not rule out mandation, hints at DB announcement
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Emma Reynolds has become a further pensions minister refusing to rule out investment mandation when asked about fiduciary duty at the Pensions and Lifetime Savings Association’s annual conference on Tuesday. She has also said there could be an announcement about private sector defined benefit schemes when the pensions review interim report is published this year.
Reynolds has said improving retirement outcomes and boosting the UK’s economy should be a “win win”, suggesting that members’ interests do not take priority over the government’s economic ambitions.
Asked if she could confirm that the government will not consider mandation, she replied that the government is “considering all the options for now”, adding: “There will be some more clarity around this.”
Reynolds hastened to add that pension professionals know how to invest in a broader range of assets better than ministers: “We will not be micromanaging the decisions pension schemes make on behalf of their members. But we do think there is quite a lot of potential to drive investment into the UK.”
She claimed that members would prefer UK-based infrastructure investments, based on anecdotal evidence an Australian pension fund related to her.
The minister also revealed that the government will be discussing private sector defined benefit schemes, which are not part of its pensions review but formed a big part of the previous government’s plans.
“We haven’t forgotten about DB,” Reynolds said. She explained one of the reasons for not discussing it now was that the last government “did a major consultation” on DB.
“We are looking at that very seriously. It may be – may be – that we have something more specific to say about that at the interim report stage of phase one” of the review, she said.
Asked if the government would pursue the idea of a public sector consolidator, she said again that all options were still being considered.
On DC, Reynolds confirmed that pension schemes will have to offer a decumulation “default”. The statement comes after some in the industry questioned whether the government would go with a hard default into a product or if schemes would default members into a retirement journey.
Reynolds also touched on adequacy, saying she was “looking closely” at implementing the recommendations of the 2017 Automatic Enrolment Review.
She also hinted that the pensions review will consider contribution levels.
“I can’t announce anything today, but I certainly think we do need look at contribution levels, we need to look at AE, we need to look at some of the groups that have traditionally been underprovided for, whether that’s women, or some ethnic minority groups or indeed the self-employed. These are things that are absolutely at the forefront of phase two,” she said.
Is the government threatening mandation to spur pension funds into investing in UK assets?
