Opperman not rushing CDC, defends statements season – DC & Auto-enrolment

Speaking at a Work and Pensions Committee hearing on Monday, Opperman also said that his ambition was to allow transactions on the pensions dashboards in the long term, along with costs and charges, while the state pension will be shown from launch. 

Further dashboards regulations can be expected “early in the winter”, he said.

Slow but steady progress on CDC

Opperman described CDC schemes as “a young beast”, and said the Pension Schemes Act, as it pertained to CDC schemes, was made deliberately complex in order that it could be “as flexible as it could possibly be”.

Though Royal Mail is currently “at the front of the queue”, the CDC regime was not created solely for its benefit, and there are “others in those types of organisations… who could potentially go down that route”, he said.

“We also want to see multi-employers, we also want to see other versions of CDCs going forward. Now, there is a degree to which you’re going to have to design this as we go along, and there is a degree to which the engagement is a work in progress.

“But we are creating something new, and [the Department for Work and Pensions] never moves too quickly. But we’re also doing it with due pace to understand and appreciate that this is something that is complicated — it’s not simple,” Opperman explained.

He cited examples of poor member communication in CDC schemes in other countries that are a cause for concern and will need to be addressed in the UK regime – a “generational impact between employees and short-term employees” that would likewise need to be solved.

“We are laying the affirmative regulations and the response to the impact assessment for publication in December of this year. The Pensions Regulator will commence consultation on its draft code of practice in the spring of next year. We will be laying the regulations and updating the guidance in the spring of next year,” Opperman said.

“The code of practice will then be laid in probably May 2022. And, obviously subject to all of these various processes, we think Royal Mail will be up and running and can come into force and will be able to submit their application in the summer of next year.”

There would, however, be no regulations for multi-employer CDC schemes before the summer of 2022, he said.

Target set for guidance uptake

The government has introduced a range of measures, including the stronger nudge, with the aim of increasing guidance uptake, but has so far stopped short of introducing automatic appointments with Pension Wise.

Opperman said that the stronger nudge would help establish taking pensions guidance as “the norm”, and that the government is introducing other measures to assist with this ambition, including the mid-life MOT.

Pressed to put a figure on it, he said the government hoped the stronger nudge would increase uptake of Pension Wise guidance to 22 per cent from 14 per cent.

He added, however, that automatically enrolling all over-fifties into Pension Wise guidance would cost between £45m and £80m, and introducing automatic appointments with Pension Wise for people looking to access their pension pots “would not be the appropriate way ahead and I would not support it”.

Statements season controversy

Opperman acknowledged that the government’s proposal for a “statements season” is “controversial”, and that “there is pushback from some bits of the industry”.

“My idea is […] that in reality you should do what we already do with tax, we do with exams, we do with A levels, we do with university, we do with a whole bunch of strategic decisions that occur in all of our lives: that we should have an annual period of time — there’s an argument over how long — when you receive your statement,” he explained. 

He argued that this will allow people to see all of their statements and have a better understanding of their situation, with the “holy grail” being that “we would have a situation when people would meet in a pub and go ‘I’ve got my statement. Do you understand yours?’

“They then have a discussion about this and this becomes a thing.”

Committee member Steve McCabe MP asked Opperman what he thought of the verdict of former pensions minister Sir Steve Webb, who said that the statements season is “an analogue solution in a digital world — which wouldn’t even achieve much in an analogue world”.

Opperman countered: “Clearly, online versions are very important — dashboards will be crucial. But are you seriously saying that your elderly mum or dad, or my elderly mum or dad, and the vast cohort of pensioners out there who are not computer literate let alone unable to understand a savings app or a banking app and a pensions app going forward are [not going] to benefit from this?

“We will require written pension statements for some considerable period of time to come. That is absolutely clear.

“We are trying to drag a great product out of the 19th century, skipping the 20th century, into the 21st century. And this is a phenomenal product (pensions), but it is definitely something that needs modernising. If Steve wants to oppose modernisation that is a matter for him.”

Responding on Twitter to Opperman’s hope for pensions conversations in the pub as a result of the statements season, Webb said: “You don’t really need satire when this is how government sees things”.

Quizzed by committee members over the government’s handling of the normal minimum pension age rise, the approach to which was reversed without notice last week, John Glen MP, economic secretary to the Treasury, said the Treasury’s view was that it was better not to “overwhelm the rights” of schemes with protected pension ages.

When asked, Glen was unable to put a figure on how many people were affected when the government decided to close the transfer window early, and pledged that “lessons will be learnt” from the way it was handled.