The UK pensions industry has expressed concern over potential delays to upcoming regulation as a result of a surprise general election announcement from the prime minister. Yesterday Rishi Sunak confirmed the next UK general election will be held on 4 July.

The industry has reacted by setting out top priorities for a pontentially new government.

Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association (PLSA), said that whoever wins the forthcoming general election should do three things: set out a plan for increasing workplace pension contributions so more people have an “adequate pension in retirement”; ensure that people approaching retirement receive more support and the right products; and that it works in partnership with the pensions sector on how to attract pension fund investment to meet policy goals such as UK growth and the transition to net zero.

Tim Middleton, director of policy and external affairs at the Pensions Management Institute (PMI), added that the Pensions (Extension of Automatic Enrolment) Act 2023, which gained Royal Assent last September, should be a priority.

He said: “It would be extremely frustrating for these overdue reforms to be delayed any longer.”

He pointed out that when the coalition government came to power in 2010, one of their first reforms was to the drawdown rules.

“I would hope that an incoming government would consider reforms to the Freedom and Choice regime as a priority. There is clear evidence that members are making poor decumulation decisions and an initiative to address this would be most welcome,” he continued.

Middleton, however, added that the biggest concern at the moment is that there is no shadow pensions minister. “This is something that must be rectified as a matter of urgency.”

Spence & Partners practice head Tom Pook also expressed concerns over potential delays. He said that there is a possibility that the election will delay the new UK Funding Code as well as the Pensions Dashboards.

He said: “This would be unwelcome and potentially damaging to ever delivering the promised benefits to savers.”

David Fairs, partner at LCP, also expects the upcoming election to delay the new DB funding Code.

david fairs

David Fairs at LCP

The regulations bringing the new regime into force on 22 September have already been laid, and The Pensions Regulator’s (TPR) plan was to lay the new code during June in order to give the necessary 40 days for the code to come into effect for the September implementation date.

But according to Fairs, even if TPR could lay the code before the end of the week, there will not be enough time for the code to be effective for the September date.

He said: “This means that schemes with valuation dates shortly after 22 September will to have to comply with new regulations without having the benefit of the guidance from the code on how TPR expects schemes to interpret them.”

Fairs added that if the next government wants to pursue a different approach, there could be a significant delay before the new code is laid. “In those circumstances, the trustees might have to rely on the draft code that was consulted on at the end of 2022, also taking account of changes from the draft to final regulations.”

Cross-party support

There are also areas of pensions policy where there is cross party support.

This includes the development of multi-employer collective defined contribution (CDC) and at-retirement CDC plans as well as Pensions dashboards and value-for-money requirements.

Fairs pointed out that implementation of the 2017 Automatic Enrolment reform is also likely to be adopted by a new government.

He also expects that the plans to use pension assets to help boost the UK economy in some form are also likely to persist whoever forms the next UK government.

“That also means that the building blocks to facilitate investment in productive finance will also be on the next government’s agenda,” he noted.

Fairs said there is likely to be a focus on consolidation, the adaptation of the Pension Protection Fund to establish a public sector consolidator and a full authorisation regime for superfunds.

He added there may also be the facilitation of the extraction of surplus in order to incentivise pension schemes and their sponsors to think of wider investment strategies.

He said: “Pensions policy has been a fascinating and busy area in recent times and it looks like it will continue to be a fascinating for the foreseeable future. The timing of the election took us by surprise and while it’s clear that there will be some changes coming down the track and uncertainty around the funding code, there will also be a lot of continuity around some of the big themes.”

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