As the new Prime Minister made ruthless changes to her cabinet, Ros Altmann understandably made the decision to quit her role as pensions minister on the premise that "short-term political considerations, exacerbated by the EU referendum, have inhibited good policy-making".
The Department for Work and Pensions has welcomed Watford MP Richard Harrington as Ms Altmann’s replacement and his job title will be ‘Parliamentary Under-Secretary of State Pensions’. This is the lowest of the three tiers of government minister, junior to both a Minister of State and a Secretary of State.
This decision to ‘downgrade’ the role of pensions minister will come as a significant blow to the sector, given that it is yet again likely to endure the brunt of turbulent times ahead following the country’s decision to leave the European Union on June 23rd 2016. Both defined benefit (DB) and defined contribution (DC) schemes have been significantly impacted by the vote.
The majority of businesses carrying the investment risk of DB pension schemes were already in deficit and unable to meet their obligations to pay-out to employees even before the vote to leave was announced. These schemes are set to endure an even larger shortfall between assets and liabilities as Brexit adds a colossal £85 billion to its liabilities. DC schemes will not escape Brexit unscathed either as factors such as low interest rates, low returns on assets, and low gilt yields continue to reduce pension pot growth for savers across the UK.
Changes in government legislation affecting pensions and the repercussions of Brexit are not the only areas of concern related to the decision to downgrade the role of Pensions Minister. Steve Webb, former Pensions Minster, under the coalition government stated that “the seniority of ministers really does matter, not least in the dealings with other government departments such as the Treasury” An understandable response given that the Department for Work and Pensions (DWP) is responsible for overseeing:
Automatic enrolment of ten million workers into workplace pensions
Implementing changes to State Pension legislation and policy
Policy on the existing multi billion pound deficit in pension funds
Ensuring the recently introduced pension freedoms are working effectively
Given that pensions form an integral part of an individual’s security in later life. The instability of the country’s economy, combined with the recently implemented pensions freedoms surely needs a strong, powerful and highly influential figurehead championing the cause of pensions at the highest level of government, rather than a demotion to the lowest tier of government minister.
The Government needs to stop using pensions as a guinea pig to test drive badly conceived ideas in the vain hope that they can obtain quick fix solutions.