New Independent Retirement Savings Commission should advise on pension reforms, says NAPF

Out-Law News | 17 Oct 2014 | 12:13 pm | 2 min. read

UK pension laws should not be amended until a new independent body is set up to "define, measure and promote good retirement outcomes", the National Association of Pension Funds (NAPF) has said.

The industry body has called on the next UK government to create a new Independent Retirement Savings Commission (IRSC) to fulfil that function.

"Savers need their long-term interests to be at the heart of pensions policy; we are calling on the government to create an Independent Retirement Savings Commission, accountable to the secretary of state for work and pensions, with a clear remit to define, measure and promote good retirement outcomes," the NAPF said in its pre-election manifesto (28-page / 2.74MB PDF). "No new legislation should be proposed or enacted until this Commission is in operation."

The IRSC should be tasked with "reviewing retirement outcomes" and with making recommendations to the government and Financial Conduct Authority on what improvements can be made. The review should include an assessment of advice, products and other solutions available to retiring workers, the NAPF said.

NAPF chief executive Joanne Segars said that the UK pensions industry had had to respond to "swathes of legislation" in the last year and comply with the new rules within "a very tight deadline". She said it was important that changes to pensions regulation "are carefully thought out".

"Ensuring the long term interests of savers, not the short term interests of politicians, are at the heart of pensions policy must be the priority of the next parliament," Segars said. "This last year has been characterised by swathes of legislation that pension schemes now have to implement to a very tight deadline. It is vital for the long term interests of pension savers’ ultimate retirement outcomes that future changes in pensions policy are carefully thought out and implemented, which is why we need an Independent Retirement Savings Commission to focus on the long term and protect the interests of all savers."

A new IRSC would act as "an important check on disproportionate cost" being imposed on pension schemes where the costs are ultimately passed on to savers, NAPF said. It also urged the UK government to fight attempts at EU level to "drive up funding requirements through the creation of a ‘holistic balance sheet’".

In its paper, the NAPF also called for the next UK government to change the way pensions are regulated. It said the focus of regulation should be on pension trustees. It said there should be a move away from "regulating, prescribing and guiding the activities of the trustees who run pension schemes" to a new regime where the "fitness, competence and expertise" of trustees is regulated in accordance with set criteria.

Pension schemes could only be run by trustee boards that meet the criteria, under the plans.

A new pensions regime is due to come into force in April 2015 and will give members of defined contribution (DC) pension schemes more flexibility to access their savings as they choose without necessarily having to purchase an annuity or facing punitive tax rates.

Once in force, the new regime will continue to allow savers to take up to a quarter of the value of their pension pot tax free on retirement, with any additional lump sum or pension taxed at their normal marginal tax rate. They would then be able to keep their pension invested and access the balance over time. These new flexibilities will be backed by a right to free independent guidance at the point of retirement.

The new Taxation of Pensions Bill was introduced for the first time before parliament earlier this week.