Ryan FowlerEmma Reynolds MP has been appointed as the new pensions minister at the Department for Work and Pensions (DWP), taking on a unique dual role that also includes responsibilities within the Treasury. This appointment comes at the start of a new Labour government and at a crucial time for many pensions policy developments.
Rachel Vahey, head of public policy at AJ Bell, commented on Reynolds’ new role, highlighting the historic tension between the DWP and the Treasury. “The area of pensions has always sat, somewhat uncomfortably, between two masters. The DWP is responsible for paying state pensions and the regulations for occupational schemes. But ultimately it was always the Treasury that had the upper hand, with control over the financials – setting pensions tax rules and the level of state pensions.”
Vahey continued, “Historically, pensions ministers and Treasury ministers have had to rub along together, both having a say in people’s income in later life. But in a breath of fresh air, the new Labour government is seeking to ease this tension by appointing a minister that has a foot in both camps and should have the clout in both departments to get things done.”
Reynolds’ appointment comes at a pivotal time, with the new government relying on economic growth to meet spending commitments. The Labour manifesto promised a review of pensions to improve outcomes and encourage greater investment in UK Plc, likely continuing the ‘Mansion House’ agenda started by the previous government, which focuses on boosting private equity holdings in occupational pension schemes.
Vahey noted, “While the review is ongoing and the bonnet is up, the Labour government may take the opportunity to consider other changes, such as pensions tax. Reynolds’ new dual role will make it much easier to bring that into the fold of one overall review.”
Several pressing issues await Reynolds’ attention, including launching pensions dashboards to the public and advancing the next stage of automatic enrolment reforms. The state pension will also likely require review, and Reynolds’ dual role should facilitate driving forward necessary changes.
Vahey remarked, “All eyes will be focused on the King’s Speech next week, and whether a Pensions Bill makes the cut. Regardless of what happens, the new pensions minister will play a key role in shaping UK retirement policy in the coming months and, hopefully, years. The post of pensions minister has historically been depressingly short-term, something which always clashed with the long-term nature of saving for retirement. Keir Starmer’s clear focus on stability is hopefully an indication that Reynolds will be given space to deliver sensible, long-term pensions policy focused on boosting the amount people save for retirement.”
Labour’s Pension Review Priorities
1. Implement pensions dashboards Pensions dashboards have faced multiple delays and must not be postponed again. This initiative is vital for helping pension savers understand their savings and encouraging them to save more and consolidate plans for a better retirement deal.
2. Set a new automatic enrolment agenda Automatic enrolment has successfully created millions of new pension savers. Now it needs to move to phase two, lowering the minimum age to 18 and removing the minimum contribution limit, potentially boosting pension pots by £120,000. A plan is needed to raise contribution rates over time.
3. Remove barriers to transfers While preventing pension scams is crucial, it is equally important that pension savers can transfer to safe schemes easily. Current regulations need re-writing to ensure only dubious transfers are stopped, not legitimate ones.
The Labour government also aims to consolidate pension funds to deliver better returns for UK savers and greater investment in the UK economy. Historically, UK pension funds and insurers have significantly reduced their holdings in UK equities, a trend Labour hopes to reverse to boost GDP growth.
Reynolds’ appointment marks a significant shift in how pensions policy may be managed, with her dual role expected to streamline and strengthen the development of retirement policies, ensuring a balance between immediate economic needs and long-term retirement security.
