A UK parliamentary committee charged with scrutinising pensions policy has recommended the government create an independent commission to review a range of legislation after the upcoming general election.
The cross-party committee recommended the commission review several aspects of government policy including the impact of the changes to the defined contribution (DC) market and auto-enrolment.
It also said the Department for Work and Pensions (DWP) should not divert resources towards developing collective DC (CDC) or shared-risk schemes – a flagship policy for the current pensions minister.
The committee said pensions regulation should be managed by a single body – not the current split between The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) – and criticised the government for sluggish progress on automatic transfers of DC pots.
On the imminent changes to the DC market that see the ending of compulsory annutisation at retirement, the committee said it would take time for the industry to understand consumer behaviour.
It said the recommended pensions commission should assess the impact of the Budget flexibilities on default investment strategies, and consider whether a default decumulation option were required for savers making poor decisions.
The recommendation tied in with a proposal by the Centre for Policy Studies (CPS), which called for savers to be defaulted into a secure retirement income system if no active decisions are made.
MPs also said the commission should assess the impact of the reforms on the suitability and accessibility of retirement products, and recommend market interventions where it was not working in savers’ best interest.
On CDC, a policy from junior coalition pensions minister Steve Webb, MPs called for a halt on diverting any resources until auto-enrolment is complete and the DC market operating effectively.
MPs said the independent commission should review auto-enrolment, including making recommendations on minimum contributions and defining adequacy of retirement income and how the policy should be assessed as a success.
The committee said using opt-out rates to measure success would not be meaningful in the long term.
As a policy, auto-enrolment was born from a similar independent commission set up by the previous Labour government in 2002.
Dame Anne Begg, Labour MP and chair of the committee, said good progress had been made on auto-enrolment but that current reforms had not benefited from the same careful approach as the 2002 commission.
“There is much more to be done,” Begg said.
“A new independent pension commission would be able to identify any emerging risks and explore with stakeholders how these can best be addressed.
“[It] is needed to provide coherence in pensions policy and to build public confidence and long-term stability in the system.”
The committee also reiterated a 2013 call for regulation to be managed by a single body rather than TPR managing trust-based schemes and the FCA insurance-based schemes.
It said, given the changes to the DC market and a growing divergence between trust and insurance contract regulation, a single body would provide a “clear focus” on retirement savings.
Webb supported a similar call and suggested the current set-up of government was inadequate for pensions and long-term care solutions.