Ros Altmann: Consumer champion, pensions minister

The move from poacher to gamekeeper makes Dr Ros Altmann a fascinating, if controversial, choice as the new government’s pensions minister. John Greenwood reports

It is no overstatement to say that, in the eyes of the public, Dr Ros Altmann is the most popular person within the world of pensions – and by a very wide margin.

Handing her the ministerial brief therefore looks at first glance like an easy win for the Conservative Party. But it is hard not to wonder how she will handle the inevitable compromises that come with being in government, and how she will deal with a pension industry she has not shrunk from criticising in the past. Just a few weeks into the job she has already clashed with providers for ’dragging their heels’ over pensions flexibilities.

Her predecessor, Steve Webb, came into office with barely any profile beyond his Thornbury and Yate constituency and the insulated world of pensions, where his pre-coalition pronouncements as LibDem spokesperson were generally regarded as “a nice idea, but we know it will never happen”.

Altmann, on the other hand, comes to the role with a record of campaigning for the dispossessed and the unrepresented, and with her views on the wrongs of the industry widely publicised. Her website – www.rosaltmann.com – is still open and comprises an exhaustive list of extensive and detailed critiques of government policy and provider behaviour that stretches back over a decade.

While some in the industry do not appreciate her shoot-from-the-hip style, history shows her to be a woman of principle. A former adviser to Number 10 under the Blair government, a few years later she was leading a judicial review against Labour on behalf of the ASW workers and others who lost their DB benefits that ultimately cost the Government £2.9bn.

So what does the new minister think about the change of role?

Speaking to Corporate Adviser before this week’s storm over pension access, Altmann said: “It is my ambition to make pensions work better for everyone. I now have the opportunity to make a difference from within government, which presents an exciting new set of challenges compared to those I faced as an independent policy expert.”

So what is at the top of her to-do list now that she is firmly ensconced within the DWP?

“My priorities have to be to continue the Government’s reforms to introduce the new state pension, help millions more to be enrolled into good-quality workplace pensions and safeguard the new pension freedoms.

“In particular, for today’s workers, we must ensure that people can confidently save for retirement in good-quality pension schemes and that they believe in the importance of doing so.”

Altmann says an examination of charges and poor-value products will also be a priority, although we are yet to learn whether that will result in a charge cap on retirement income products or an in-depth examination of under-the-bonnet charges in the investments held within pensions.

She says: “Millions who have started to save with automatic enrolment need to know that their pension pots will not be hit by excessive charges or poor-value products.

 “We must also improve financial education so that people know having a workplace pension is worth it – and that opting out is almost always a bad decision. And we want them to recognise the benefits of contributing more than the minimum.”

Beyond these broad-brush policy indications, Altmann is keeping her cards close to her chest, which is hardly surprising given that the general election took place only a matter of weeks ago and the July Budget is just around the corner.

But that is not preventing the industry from offering numerous suggestions on what she should do. Now that Altmann has turned from poacher to gamekeeper, she has no shortage of policies for consideration.

Now: Pensions has called on her to push for an extension to the scope of auto-enrolment through the removal of qualifying earnings, a reduction in the qualifying threshold and the introduction of auto-escalation.

It also wants Altmann to push for cross-party consensus on automatic transfers and to consider early access to a portion of pension, a policy that is supported by the National Association of Pension Funds, the ABI and the TUC. 

But Jelf Employee Benefits head of benefits strategy Steve Herbert says this looks less likely now that there is a Conservative majority in the House of Commons. “Let’s not forget that the DWP select committee was not supportive of the fact that the current set of reforms was introduced with no consultation whatsoever. The architects of those reforms are not going to want to appoint someone independent to run the rule over them and start picking holes in them,” he says.

“And given the fact that pensions tax relief is the lowest-hanging fruit as far as the Chancellor’s fiscal planning is concerned, it would not make sense to tie up so much potential revenue for a couple of years in an independent commission.”

Some have also argued that appointing a minister who is a Conservative peer but not an MP could undermine Altmann’s authority.

Barnett Waddingham senior consultant Malcolm McLean says: “It is good that we will have a new minister well versed in pensions and not someone with little or no knowledge of the subject.

“Having an unelected new peer as the pensions minister is bound to attract criticism from some quarters and Ros will have to accept that her position within government will not now allow her the luxury of claiming to be an independent consumer champion and criticising Conservative policies.”

That said, while Altmann does not have polling station approval, her support among the general public – through the media – is undeniable. She can also point to minister for welfare Lord Freud, the other unelected minister in the DWP, who has been doing the job for years.

The industry will review her CV for clues on where her ministerial enquiries will take her. The annuity distribution process – where she has been vocal in criticism of the status quo for years – seems an obvious point of interest. In the week before the general election, Altmann told Corporate Adviser she wanted to review the way in which the FCA had overseen the annuity market, and that such a review could possibly lead to payment of compensation.

But it will be on issues such as state pension reform and tax relief that the Government’s real battles will be fought, with other conflicts likely around pot-follows-member, preservation of the triple lock and the possible tightening-up of the freedom and choice legislation, to name just a few.

Altmann’s willingness to embrace deserving causes looks set to make her period in office a fascinating one.        

Altmann’s Campaigns

Stripped of their pensions - Brighton
Stripped of their pensions – Brighton

Altmann’s dogged campaigning abilities have not only achieved significant results but also hold clues as to the attitude she is likely to take towards future issues in her capacity of pensions minister.

-Led a six-year campaign on a pro bono basis on behalf of 150,000 ASW, Dexion and UEF workers whose final salary pensions disappeared in 2002 when their schemes failed. Paved the way for the establishment of the Pension Protection Fund, but this did not cover those whose schemes had already gone bust. Altmann co-ordinated an appeal to the parliamentary ombudsman, who recommended redress – a recommendation that was rejected by prime minister Tony Blair. She pushed for a judicial review of the decision, which found in the workers’ favour – a judgment that the Government took to the Court of Appeal, which in 2008 found the Government guilty of misleading pensioners and ordered £2.9bn in redress

-Supported 1.5 million Equitable Life policyholders who blamed the Government for inadequate regulation of the company

-Has campaigned vigorously for years for reform of annuity sales processes

Michael Johnson: A policy blueprint for the new pensions minister 

Johnson

Centre for Policy Studies fellow Michael Johnson was quick off the mark with a raft of suggestions on where Altmann should direct pensions policy. These range from policies directly within the DWP’s remit to those that would involve significant buy-in from the Treasury. 

-Establish a grand vision for saving, with the aim of raising the nation’s household savings ratio from its current 5.9 per cent to the 1980s’ average of 13 per cent

-Develop a strategy based on the pursuit of simplification, transparency and intergenerational fairness, prioritising trust-based governance, controlling costs, eliminating inefficiencies and ‘rent-seeking’ behaviours and working for cross-party political consensus

-Rapidly increase the private pension age of 55 (due to rise to 57 in 2028) to 60 in 2024. Increase it by a year every two years, from 2016

-Include Isas in the AE legislation, branded as the Workplace Isa

-Scrap pot-follows-member in favour of aggregation

-Establish ‘value for money’ benchmarks, then identify the key policy levers that would help deliver them when (i) accumulating, and (ii) accessing savings

-Encourage Nest and its competitors to develop a collective drawdown capability to enable retirees to pool their longevity riskk

-Establish a not-for-profit national annuities auction house to automate the process of shopping around, adding to pricing tension and transparency

-Simplify the regulatory framework.

PENSIONS-RELATED BUT TREASURY DOMAIN

-Simplify the tax framework: combine NI contributions and income tax

-Signal that the triple-lock indexation of the state pension will cease in 2020, to be replaced by CPI

-Replace tax relief framework for pensions contributions with a simple 50p per £1 saved, up to an annual allowance of £8,000, paid irrespective of taxpaying status. Cap combined annual Isa and pensions contributions at £30,000 and scrap lifetime allowance

-Map a course to pure DC for public service pensions

-Combine the 101 disparate LGPS funds into a single fund with four separate, competing asset allocators.