12th May 2015
The pensions campaigner and former adviser to Tony Blair, Dr Ros Altmann has been appointed pensions minister as David Cameron is able to fill his cabinet entirely with Conservatives now that the Liberal Democrats are out of government.
For the full list of cabinet appointments so far, see the Government’s website.
Altmann takes over from Liberal Democrat Steve Webb, who lost his seat in the election last week, but in his ministerial role oversaw sweeping changes to pension rules in April, giving retirees new freedoms to spend their funds as they choose and removing the effective requirement that they purchase an annuity. The reforms have many supporters, but critics have raised concerns that some pensioners will spend their funds too quickly or invest them poorly leaving them without enough money to live on in retirement.
Altmann campaigned on behalf of thousands of workers who lost their pensions following their employer’s collapse, leading to the creation of the Pension Protection Fund.
She also championed the rights of women when the government sought to rapidly increase their state pension age, leaving many of their retirement plans in ruins. She helped to negotiate more gradual increases to women’s retirement age.
Altmann has spoken out on behalf of those who lost their savings in the collapse of Equitable Life and on behalf of those who were disadvantaged by the previous annuity rules, helping to bring about the recent pension freedoms.
Initially, it was suggested that Altmann would take on a new role as minister for consumer protection.
Malcolm McLean, senior consultant at Barnett Waddingham says: “I am not particularly surprised the decision has been taken to appoint Ros Altmann as the new pension minister (and not as previously announced as a proposed, separate new minister for consumer protection).
“It never made much sense to have her as a consumer minister (involved in addressing specific pension issues) in the House of Lords as well as a separate pension minister operating from within the Commons. The risk of either overlapping roles or alternatively some artificial division of responsibilities was self-evident and a single ministerial position was obviously more desirable. Having promised Ros a position prior to the election (the timing of which announcement was not completely clear) the Prime Minister probably felt committed to give her the job.”
He adds: “Steve Webb was always going to be a difficult act to follow and it is good that we are going to have a new minister well versed in pensions and not someone, as happened several times prior to Mr Webb’s appointment, with little or no knowledge of the subject.
“Having an unelected new peer as the pension 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 from outside.
“Having said that, I wish her well in her new role and I’m sure she will rise to the challenge and bring a wealth of knowledge and experience to it.”
The biggest changes in decades
Joanne Segars, chief executive of the National Association of Pension Funds, points out that it is only two months on from the biggest pensions reforms in decade and much work is yet to be done.
She says: “We’ve weathered the first wave but that was just the start – there’s much more to do to make sure savers’ interests are kept safe in the wake of the flood of recent reforms.
“We are looking forward to working with Dr Altmann. We want to share our expertise to negotiate the tough challenges that lie ahead – some of which may require difficult decisions. We encourage the Minister to consider the benefits an independent commission would offer. By providing impartial and independent expertise and analysis a commission would allow the Minister to make policy that stands the test of time.”
“Expertise and continuity are crucial”
Others expressed hope that the new minister would be allowed to stay in post long enough to make a meaningful difference to the sector. Old Mutual Wealth retirement planning expert Adrian Walker:“ Having stayed in the job for the full term of the Parliament [Steve Webb] was able to successfully steer a number of important policy changes through the House of Commons. Similarly, we hope the new Government will recognise the benefit of continuity and avoid the ministerial merry-go-round we have seen in this role in the past.”
Nick Ayton, managing director at GenLife, welcomed the appointment of a figure with great expertise in the field, given the scale of the task ahead. He says: “Ros Altmann brings considerable industry experience which, given the challenges ahead in getting more people to take a serious interest in preparing for retirement, will be essential in the coming weeks and months.
He adds: “It would be a real shame if Webb’s vision for re-shaping how people save for later life was lost and pensions become nothing more than a political football, with lots of chopping and changing of policies to entice voters. Ros will have her work cut out to ensure the pensions revolution that Steve Webb begun does not hit the buffers and that consumers are protected from high charges from legacy providers.”
Priorities for the new minister
But among the plaudits, there were also words of advice for the new minister. Tom McPhail, head of pensions research at Hargreaves Lansdown, set out the priorities for Altmann to address:
1. Increase participation rates in pensions. Even with auto-enrolment, five million employees and another 4.5 million self-employed are still missing out on a workplace pension. Participation rates in pensions among the self-employed have collapsed over the past 10 years, down to just 500,000 people.
2. Increase contribution rates into workplace pensions. Even when auto-enrolment is up and running, the minimum contributions are not sufficient for most people to secure a good level of retirement income.
3. Shopping around at retirement. Make sure that whatever their fund size, everyone is able to shop around at retirement and to get a good deal to meet their needs. This is essential irrespective of whether they are buying an annuity or going into drawdown.
4. Ensure pension savers can enjoy a balanced tax system which incentivises everyone to save for retirement, irrespective of their level of earnings. As part of this we’d like to see the abolition of the Lifetime Allowance.
5. Deliver the state pension reforms next year, ensuring that everyone understands what they are entitled to and that they are given every opportunity to maximise their state retirement income.
McPhail adds: “Ros is inheriting a pension system which is in the throes of implementing three hugely significant reforms; auto-enrolment, freedom of access and the changes to the state pension. She also succeeds a popular and effective predecessor. Her experience in pensions will be a great asset to her and we look forward to working with her to continue the good work of the previous government.”