It may still be the summer holidays for many of us in the UK, but for the new Labour government’s Work and Pensions Department work continues apace.  On Friday 16 August together with the Treasury and the Ministry of Housing, Communities & Local Government the DWP published the terms of reference for phase one of its pensions review. 

What is the pensions review?

In its manifesto the Labour party promised us a “review of the pensions landscape”, focussing on two key themes:

  • how to improve pension outcomes; and
  • how to increase investments in UK markets.

The terms of reference published on Friday outline the scope of phase one of that review, which will focus largely on the second of these themes.  The review will be led by new Pensions minister Emma Reynolds and will engage with industry stakeholders and the LGPS.

What will the review look at?

We now know that phase one will look at developing policy in the following broad areas:

  1. Consolidation of DC schemes;
  2. Consolidation of the LGPS and improving governance;
  3. The structure of the pensions eco-system and how to shift the focus from cost to value in order to deliver better member outcomes; and 
  4. “Encouraging” pension investment in UK assets to boost growth.

When will all this happen?

Timescales are ambitious – the review begins immediately and initial findings from phase one will be reported “later this year”, ahead of the introduction of the Pension Schemes Bill (announced in the King's Speech earlier this summer). Phase two, which will focus on “further steps to improve pension outcomes, including assessing retirement adequacy”, will also follow later this year.

Commentary

As we’ve noted previously, much of the promised review looks to have a similar focus to the last Government’s Mansion House reforms, and there has been broad industry support for this continuity of pensions policy.  With the Chancellor’s clear commitment to economic growth it is no surprise to see productive finance, and the part that DC schemes and the LGPS may be able to play, at the heart of phase one of the review.

It is notable however that this wide-ranging review of the pensions eco-system does not include any consideration of DB schemes.  The terms of reference advise that “ongoing policy development with respect to defined benefit workplace pensions schemes will remain separate from the review”. With no indications given so far, we’re waiting to see whether there’ll be any continuation of the previous government’s proposals to establish a public consolidator for DB schemes, or to make it easier for schemes to access trapped surpluses.

From the legal perspective, we’ll be watching the phase one review findings and the corresponding policy developments with interest.  In particular, “encouraging” pension funds to invest in a particular way whilst ensuring trustees and pension committees are able to abide by their other legal and fiduciary duties is a potentially challenging needle to thread – it will be interesting to see how the new government approaches this.