I have a mission to make pensions safer, better and greener. The last year has seen us try to navigate pensions down that better path, notwithstanding the impact of Covid-19. There is no doubt that coronavirus has changed so much about our country, as well as the world. Everyone has faced sadness, loss and restrictions on their lives. There is now finally a light at the end of the tunnel. Millions of vaccine shots are being rolled out every week, and cases are falling.
The pandemic has been tough for everyone, in so many different ways. But the chancellor’s unprecedented furlough scheme has ensured that, while much of our economy is in hibernation, most people continue to receive the vast majority of their salary. Employers up and down the country are ensuring futures are protected by covering minimum National Insurance and automatically enrolled pension contributions.
It is vital that we continue the success of automatic enrolment. Since 2012, we have worked hard to bring over 10m UK savers into an automatically enrolled private pension that has been transformative for so many—in addition to the state pension, which is higher than ever before.
At the same time, I have been able to progress pension legislation in parliament to support businesses and savers going forward, address pension scams, help your pension tackle climate change, and so much more.
As pensions minister, I have taken action to stop those pension scams. Historically, scammers used unsolicited phone calls to defraud their victims. In 2019, the government took action to stop this by banning pension cold calling and introducing tough fines and sanctions for anyone breaking the rules. We have gone some way to try to prevent scams in legislation. The Pension Schemes Act puts in place safeguarding measures that now enable trustees to prevent a pension transfer in certain circumstances—such as the transfer raising “red flags” triggered by who is involved.
However, the internet has, sadly, opened up a new frontier for fraud. Fraudsters try to “clone” real companies to perpetuate an investment scam, where crooks imitate legitimate financial firms. Much of this is done through advertising that creates the illusion of legitimacy. I urge readers to be very careful and double check before taking up investment “opportunities” advertised on social media and the internet that are too good to be true. Google, Facebook and even Instagram are now the vehicles of choice for fraudsters. Online giants like Google need to take a long and hard look at their protocols for who they allow to advertise. I have been clear that they must be doing more to assess content and prevent these fraudsters from peddling their scams, which cause so much devastation to victims.
We are also extending the powers of the Pensions Regulator to be able to take action against reckless pension bosses who run schemes into the ground, or plunder people’s pension pots to line their own pockets. Going forward, the Pensions Regulator will have the power to issue civil penalties of up to £1m, alongside new criminal offences, with up to seven years in prison.
At the same time, we have enabled businesses to have a new type of future pension saving: collective defined contribution, or CDCs, are a hybrid of defined benefit and defined contribution. The Royal Mail and its Communication Workers Union have pioneered this approach, and see a collective defined contribution pension as the way forward for this massive and vital UK business.
In addition, the Pensions Schemes Act has gone further to make it as easy as possible for everyone to manage their retirement plans. Like many of the older generation, my granddad had just three jobs in his lifetime. Today, most millennials can expect to have at least 12 jobs throughout their life. With pension auto-enrolment meaning more of us are saving for retirement than ever before, keeping track of pension pots from multiple employers can be tricky.
That is why the Pensions Schemes Act allows us to produce a pensions dashboard: one single place—just like any other banking or savings app—to see all your pension pots. It will be accessible only by you or your designated independent financial adviser. The dashboard will unite billions of pounds in lost, unclaimed pensions with the rightful owners. It will enable all of us to see how much we have saved, and plan better for retirement in an easy and understandable way. This matters, because we all want our pension to both provide a good return and, if possible, play its part in getting us to net zero. Our climate change measures allow this to happen.
There is no doubt that pensions and planning for the future can be daunting—even more so in these deeply uncertain times. That is why the government is taking steps to support and protect savers, make pensions easier to understand and provide assistance in planning for retirement.
As we recover, pensions have a crucial role to play. We can, and we will, build back better from Covid-19.
This article is featured in Prospect’s new “The Road to Recovery” report, published in partnership with Lloyds Banking Group, the Government of Jersey and Jersey Finance. Read the full report PDF here.
