PLSA keeps policy focus on improved pension adequacy

Expanding the scope and level of automatic enrolment is the top strategic policy objective for the Pensions and Lifetime Savings Association (PLSA) in 2023, as it celebrates its 100^th anniversary.

The Association’s policy priorities are reviewed annually by the PLSA Policy Board, a body comprising experts from a broad cross-section of the PLSA’s membership, with responsibility for setting the policy agenda and ensuring the PLSA is tackling the issues that matter most to its members.

The PLSA has been consistently calling on the Government to improve pension adequacy for millions of savers through targeted policy interventions – especially for under-pensioned groups – for several years.

In 2022, the Association built on its 2018 report, ‘Hitting the Target’, by conducting extensive research into how a range of policy proposals would improve outcomes for different cohorts of pension savers. This work culminated in ‘Five Steps to Better Pensions: Time for a New Consensus’, a consultation setting out clear reforms to prevent pensioner poverty and help more savers achieve a better income in retirement.

Five recommendations for reform:

• National objectives: The creation of clear national objectives for the UK pension system – ‘adequate, affordable and fair’ – combined with regular formal monitoring of whether it is on track to achieve these goals.

• State pension: Reform of the state pension so everyone achieves the Minimum Retirement Living Standard, to prevent pensioner poverty.

• AE reform: Reform of AE so more people are included, such as younger people, multiple job holders and gig economy workers, and at a higher level so people on median earnings are likely to achieve the Pensions Commission’s Target Replacement Rates. These measures include saving from the first pound of earnings, and gradually increasing contributions from 8% to 12% from the mid-2020s to the early 2030s – with contributions split evenly between employers and employees.

• Under pensioned groups: Additional policy interventions to help under pensioned groups, including women, gig economy workers, self-employed people, and others.

• Industry initiatives to achieve better pensions: actions to help people engage with pensions, receive higher contributions, or get better pension outcomes.

Later this year the PLSA will publish its response to its ‘Five Steps’ consultation along with additional evidence of the need for reform. The influential Retirement Living Standards will also be updated to ensure they accurately reflect the public’s expectations of what retired households need as well as to remain relevant to real world retirement spending.

In addition to the strategic priority of pension adequacy, the PLSA Policy Board has also targeted six additional regulatory policy areas of focus:

• Pensions Dashboards – The PLSA will help the industry prepare for its obligations to provide data to Pension Dashboards and ensure that the consumer protection regime is appropriate. The PLSA will also articulate industry needs to regulatory bodies, related government-sponsored organisations and other stakeholders.
• DB Funding Code – The PLSA will continue to represent the pensions industry in responding to TPR’s proposals for the funding regime for DB pensions, seeking to ensure the regime adopts a flexible approach to DB schemes that are not maturing.
• Responsible Investment & Stewardship – The PLSA will play its part in removing barriers and supporting pension schemes to invest responsibly. The PLSA plans to continue to produce guidance and support to schemes on responsible investment and stewardship issues, including its annual Stewardship and Voting Guidelines.
• Local Government Pension Scheme (LGPS) – The PLSA will spearhead policy and research initiatives to help mitigate the major issues and challenges facing the short-term operation and long-term sustainability of the LGPS as identified in its 2022 report, ‘LGPS: Today’s Challenges, Tomorrow’s Opportunities’.
• DC Decumulation – The PLSA will be campaigning for the adoption of our Guided Retirement Income Choices (GRIC) proposals which aim to help members of DC schemes when they draw their pension. The proposals include introducing a statutory obligation on schemes to support members via signposting to suitable products, with appropriate and stringent standards for governance and effective communications.
• DC Value for Money – It is vital that the UK pension system is delivered efficiently to maximise the value it provides to savers. The PLSA will advocate for regulatory definitions of ‘Value for Money’ that are well designed so as to be of practical use to both schemes and savers, without involving excessive cost or complexity.

Beyond these targeted priorities, the PLSA will also undertake a wide range of other policy work, including responding to a large number of Government consultations or statements, for example, on the State Pensions Age, CDC, and Small Pots. We will also undertake various PLSA initiatives such as the promotion of the Retirement Living Standards, the maintenance of the Pension Quality Mark, and – with the Investment Association and the LGPS Scheme Advisory Board - the Cost Transparency Initiative.

The PLSA will also be working closely with the Association of British Insurers and industry partners to deliver the ‘Pay Your Pension Some Attention’ campaign.

John Chilman, Chair, PLSA Policy Board, said: “All of our members – whether they are a defined benefit or defined contribution fund, a Local Government Pension Scheme fund, or a Master Trust – are passionate about ensuring the UK pension savings system gives people the best possible chance of saving what they need to enjoy the retirement they want.

“As the PLSA celebrates its 100^th birthday, the PLSA Policy Board will continue to champion a policy framework that means people will have an adequate income in retirement and aim to ensure the regulatory and operating environment is appropriate for our members.”

Nigel Peaple, Director of Policy and Advocacy, PLSA, said: “The year ahead will be another busy one. As ever the PLSA has both a proactive and reactive agenda. On the former, we will continue to make the case for our reform of the UK pension system – ‘Five Steps to Better Pensions – to update the Retirement Living Standards, and to lobby for the adoption of our decumulation proposals – ‘Guided Retirement Income Choices’. And on the reactive work, we are already occupied on the review of the DB funding code and the implementation of pensions dashboards, and expect to respond to at least a further dozen initiatives during the year.”

NOTES FOR EDITORS

The Policy Board guides and decides on our public policy positions. Its remit stretches across all aspects of our policy work on pensions and lifetime savings and its goal is to shape the policy agenda for all aspects of retirement income.

It is supported by four Policy Committees which focus on specific policy issues for Defined Contribution, Defined Benefit, Local Authority and Master Trust pensions. They advise the Policy Board, take forward delegated policy work and give representation to PLSA members from these sectors in PLSA policy development.

Four Reference Groups, covering the same sectors, brief members on relevant policy developments, gain input on policy and lobbying issues and provide a forum for members to share their insights and experiences on regulatory and legal issues. They bring the number of PLSA members involved in the foundation of our lobbying and influencing work close to 400.

The Policy Board, Policy Committees and Reference Groups provide a voice for our members and work to make sure that our policy adds value for our membership, the pensions industry and society as a whole.

Mark Smith, Head of Media Relations
020 7601 1726 | [email protected]