6 November 2008

Rt Hon Rosie Winterton MP

Minister of State for Pensions and the Ageing Society

Institute of Chartered Accountants for England and Wales Annual Pensions Conference - Where is the industry heading?

Thursday, 6 November 2008

[Check against delivery]

Good morning.

In this historic week, as President elect Obama secures victory in the White House, we will all be waiting in anticipation of his first 100 days.  But I think we all know his attention is bound to be focused on how to best to maintain stability in the global economy.

Last week, at the Mais lecture the Chancellor of the Exchequer set out the UK’s response to this question.  And it is one which is a truly global challenge.

The heart of his response was our commitment to maintaining a stable and strong economy.

And that must include a confident and secure UK Pensions sector.

Our fundamentals are fundamentals of strength.  Set up by this Government:

• The Pension Protection Fund continues to protect 11 million members of Defined Benefit schemes
• And the Financial Services Compensation Scheme protects annuities and savings.

As we ensure protection, we must also pre-empt risk.

The Pensions Regulator will ensure deficit funding plans are sustainable, responding in a flexible way.

I spoke yesterday to David Norgrove and our message is a united one:

• Schemes face falls in asset values
• Placing pressure on employer covenants

• But we have the right flexible framework to cope
• Confident pension schemes are long-term undertakings.

The Regulator’s recent statement and guidance for trustees and employers provided helpful reassurance…

…and I hope that your members welcomed that communciation.

This is the flexible and sensitive approach we need.

And let me assure you today that it will continue.

And it is right that we encourage trustees of DB and DC schemes to be vigiliant.

To look at their funds, to decide if changes are appropriate to assess their level of contributions.

And we should first encourage transparent communications, and second encourage trustees to remind members to keep their choices, such as lifestyling, under review.

And let me provide some reassurance on pensions levy rates.

Today I am pleased to announce that for 2009/2010 we will freeze the current rates for the administration levies that fund the running costs of the Regulator and the PPF along with the Pensions Ombudsman and the Pensions Advisory Service.

With this stability, the Government and the PPF are seeking to avoid additional cost pressures on pension schemes at the current time.

And whilst we the Government must provide this reassurance we must also all of us, Government and industry, reinforce our message to the consumer. 

A message that emphasises that pension funds are about long-term investment.

We must direct people to the Pensions Advisory Service as a first port of call for information and advice. 

And let me thank the Institute of Chartered Accountants for their work on Financial Capability, an ongoing initiative intended to improve peoples’ understanding of their personal financial situation.  I understand that your July event, teaching children from Tower Hamlets about money management, was a great success.   

So the PPF, the Regulator, the Advisory Service – they are equipped and ready for the challenges ahead.

And as Pensions minister I want to assure the industry and consumers that the Government will do all we can to best support the pensions industry and to protect pensioners at these times.

We are committed to taking forward the radical reforms we are proposing in the current Pensions Bill.

The introduction of automatic enrolment, mandatory employer contributions and the personal accounts scheme will ensure that all employees have access to workplace pensions saving and will result in between 6-9 million people newly participating or saving more in workplace pensions.  These are people who did not do so before.

But we must ensure that our reforms complement and do not replace good existing pensions.

Therefore today I am also pleased to announce…

…that we will bring forward amendments to the Pensions Bill on the issue of qualifying earnings for our pension reforms.

And I want to thank all those who have played a part in developing this proposal.

We will enable employers who are confident their workers are on course to receive the new minimum level of pension saving, to certify that their arrangements meet the new quality standard.

This will reduce the need for changes to the way calculations are made.

We will provide flexibility for employers and their schemes, while ensuring that all members of employer sponsored schemes regularly receive pension contributions, at least in line with the new minimum level of pension saving which they would get if in a personal account.

This reinforces our commitment to supporting existing high quality occupational pension provision.

And I hope you will welcome this step forwards on qualifying earnings.

The Pensions Bill is in its last stages of the Parliamentary process.

It is a Bill which includes Deregulatory measures aimed at reducing burdens on employers - a reduction in the revaluation cap from 5% to 2.5% for future accruals.

And let’s not forget this has the potential to save employers around £250 million per year on average in the longer term. 

As I have said this Bill will bring in radical reforms.

…together we must seize this multi-billion pound opportunity, with the potential to change the nature of saving in this country.

That’s a big chance, and a bright future…

In these times it is even more essential that as many people as possible are able to save for their retirement.

We will not shy away from that challenge…

Whether you’re Barack Obama, Alistair Darling, the Institute of Chartered Accountants, or a British taxpayer, we all face unprecedented turmoil in the global economy.  But the UK Pensions Industry is well equipped to face that challenge.  

Built on a fundamental framework of strength.

I hope together we will secure a confident future.

Thank you.