In the recent past, lead responsibility for pensions policy has been split between two government departments – HM Treasury and the Department for Work and Pensions (DWP).
Each department had a corresponding regulator – the Financial Conduct Authority (FCA) dealing with things like financial advice and the sale of individual savings products, and The Pensions Regulator (TPR) overseeing trust-based occupational pensions and the implementation of automatic enrolment.
In some ways, this fragmentation of pension policy was far from ideal.
For example, when the government decided that it wanted to introduce a charge cap on workplace pensions it needed primary legislation to give the necessary powers to TPR for trust-based pensions but had to ask the FCA to implement separate statutory rules for contract-based pensions.
Similarly, changes to pension tax relief which are the responsibility of the Treasury have often been made with little or no reference to DWP, despite the profound impact that such changes can have on the wider pensions system.
Balance of power
But in the last year, this balance has tilted decisively in favour of the Treasury with significant consequences for the potential future direction of pension policy.
One reason why Treasury has been so dominant since the election is that the big unfinished business of pension policy – reform of tax relief – was clearly a Treasury issue.
During the previous Parliament many of the biggest changes in pensions mainly related to areas where DWP had a leading role, notably creation of the new state pension and implementation of auto-enrolment.
A second reason why Treasury has become so dominant is that DWP’s pensions minister serves in the House of Lords.
Given the convention that major announcements are made in the House of Commons, all major decisions about pensions since the election have been announced by Treasury ministers (e.g. the consultation on tax relief, the cap on exit fees) or even announced by business ministers (notably the recent consultation on changing pension rights of British Steel workers).
While, at one level, it doesn’t matter who makes an announcement, this odd situation reinforces the message that the Treasury is driving the pensions agenda.
So why should this be of concern other than to avid Westminster-watchers?
The reason we should be concerned is that the Treasury and the DWP have a very different worldview when it comes to pensions. Whereas the DWP regards pensions as something ‘special’ and sees the workplace as key to solving the retirement crisis, Treasury tends to see a pension as just another long-term savings vehicle and sees things through the lens of the individual saver.
This fundamental difference was seen most acutely in the 2016 Budget when the Lifetime ISA was created, with apparently no thought for the potential knock-on effect on workplace pensions.
More worrying still, much Treasury legislation is contained in Finance Bills over which the House of Lords has no jurisdiction. This means there can often be very little effective Parliamentary scrutiny of Treasury proposals, very different to the way that DWP legislation is handled.
There is a respectable case to be made for having one government department in charge of pensions.
There is also a valid debate to be had about whether the distinction between pensions and other savings vehicles should be as clear as it has been in the past.
But these issues have effectively been decided without any debate and the Treasury worldview looks set to prevail.
Steve Webb is an ex-pensions minister and director of policy and external relations at Royal London