THE RT HON THERESA MAY MP THE RT HON ESTHER MCVEY MP
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2017 / 2018
WORK & PENSIONS
A YEAR IN PERSPECTIVE
FOREWORDS
The Rt Hon Theresa May MP
The Rt Hon Esther McVey MP
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F E AT U R E S
Review of the Year
Review of Parliament
©2018 WESTMINSTE R PUB LI CATI O N S www.theparliamentaryreview.co.uk
Foreword
The Rt Hon
Theresa May MP
Prime Minister
British politics provides ample material for analysis in the leading in changes to the future of mobility; meeting the
pages of The Parliamentary Review. For Her Majesty’s challenges of our ageing society; and driving ahead the
Government, our task in the year ahead is clear: to revolution in clean growth. By focusing our efforts on
achieve the best Brexit deal for Britain and to carry on our making the most of these areas of enormous potential,
work to build a more prosperous and united country – we can develop new exports, grow new industries, and
one that truly works for everyone. create more good jobs in every part of our country.
We have already made good progress towards our goal Years of hard work and sacrifice from the British people
of leaving the EU, so that we take back control of our have got our deficit down by over three quarters. We are
laws, money and borders, while negotiating a deep and building on this success by taking a balanced approach
special partnership with it after we have left that is good to public spending. We are continuing to deal with our
for jobs and security. The EU Withdrawal Act is now on debts, so that our economy can remain strong and we
the statute books to provide legal certainty at the point can protect people’s jobs, and at the same time we are
of exit. We have reached agreement on protecting the investing in vital public services.
rights of EU citizens living here in the UK and British
I believe that Britain can look to the future with confidence.
citizens living in the EU, on an implementation period to
We are leaving the EU and setting a new course for
give businesses time to prepare, and on a fair financial
prosperity as a global trading nation. We have a Modern
settlement. We are now pressing ahead to reach an
Industrial Strategy that is strengthening the foundations of
agreement with the EU on our future relationship that
our economy and helping us to seize the opportunities of
honours the result of the EU referendum and sets the UK
the future. We are building on our country’s great strengths
on course for a prosperous future.
– our world-class universities and researchers, our excellent
Getting the right Brexit deal is essential; but it will not services sector, our cutting-edge manufacturers, our vibrant
be sufficient on its own to secure a more prosperous creative industries, our dedicated public servants – we can
future for Britain. We also need to ensure that our look towards a new decade that is ripe with possibility.
economy is ready for what tomorrow will bring. Our The government I lead is doing all it can to make that
Modern Industrial Strategy is our plan to do that. It means brighter future a reality for everyone in our country.
Government stepping up to secure the foundations of
“
our productivity. It is all about taking action for the long-
term that will pay dividends in the future.
British politics provides
That is why we have set an ambitious goal of lifting
UK public and private research and development
investment to 2.4 per cent of GDP by 2027. It is why we
are developing four Grand Challenges, the big drivers
ample material for analysis in
the pages of
“
of social and economic change in the world today: The Parliamentary Review
harnessing artificial intelligence and the data revolution;
FOREWORD | 1
Foreword
The Rt Hon
Esther McVey MP
Secretary of State for Work & Pensions
I am delighted to be introducing The Parliamentary Review In the other half of my portfolio, the Department’s
as Secretary of State for Work and Pensions. I spoke at programme to automatically enrol employees into a
the Review’s annual gala in September 2016, and a lot workplace pension has enjoyed great success. At the end
has changed since then – both in and outside parliament. of June, over 9.8 million people had been automatically
This year I’ve been able to return to the department where enrolled – and crucially, the groups traditionally excluded
I’ve spent my whole ministerial career and witness the from this sort of saving are choosing not to opt out. We
fruition of policies I helped to found six years ago. are lowering the age of enrolment to 18 years and want
to open up the scheme further by removing the lower
This parliamentary year, the Department has continued to
earnings limit. This will make every pound earned count
build on its progress in a number of areas. July’s figures
towards retirement and consolidate this revolution in
show that employment is up by over 3.3 million since
future planning and pension uptake.
2010 – that’s over 1,000 more people getting a job each
and every day. The number of people in work reached a Many people don’t appreciate the scale of the DWP. With
record high of 32.4 million – and unemployment has not the largest budget in Whitehall, it has an annual spend of
been lower since 1975. These figures really are worth around £200 billion – greater than the GDP of Portugal.
celebrating; a job provides not only a regular wage but We make 12 million separate payments each week, which
the opportunity to progress in life. reach a total of around 20 million citizens each year.
But we know there is still more to do. Youth However, what I’m most proud of is our 84,000 staff
unemployment is down by almost 45 per cent since – whose collective efforts provide vital continuity for
2010, and we want to build on this by strengthening the country’s working and living arrangements. Day
young people’s engagement with their career options. in, day out, they help people to get into work, as well
This includes initiatives like sector-based work academies as gain access to the benefits and pensions to which
– work experience placements that also provide formal they’re entitled.
learning, life skills and interview practice. At the same
“
time the Disability Confident scheme, which I set up
back in 2013, is going from strength to strength.
Around 7,000 employers have now signed up for our The DWP has an annual spend
support to help them recruit and retain disabled people
and those with health conditions. of around £200 billion –
The backbone of our work continues to be the biggest greater than the GDP of
welfare reform in a generation – the rollout of Universal
Credit, using our “test and learn” approach.
Portugal. We make 12 million
This benefit is now live in over half of jobcentres, and
we are on course to reach every site in the country by
the end of the year. We are building a personalised
separate payments each week,
which reach a total of around
“
benefits system, one that is flexible to the demands of 20 million citizens each year
modern working practices.
2 | FOREWORD
A message from
Lord Pickles and Lord Blunkett
The ability to listen to and learn from one another And it is why we, as former Labour and Conservative
has always been vital in parliament, in business and cabinet ministers and current members of the House
in most aspects of daily life. But at this particular of Lords, feel it is important to put aside our political
moment in time, as national and global events differences and work together to ensure these stories
continue to reiterate, it is uncommonly crucial that we are given the platform they deserve.
forge new channels of communication and reinforce
In this publication, you will find an insightful take on
existing ones.
the past year in politics from the BBC’s Andrew Neil
With ongoing fractures in Westminster, the and a concise rundown of key events in industry and
reverberations of which are being felt across the parliament. Most importantly, you will be able to read
country, it is essential that politicians have a firm in-depth accounts from the individuals and organisations
understanding of the challenges with which British who make The Parliamentary Review what it is.
organisations must contend; and that leaders in
In this edition, representatives shed light on a number
both the public and private sectors are aware of the
of issues, including the potential problems that might
difficulties faced by those working in all levels of
arise with as a result of our ageing population. Others
politics, from local government to the national arena.
offered insight into the increasingly important role
This is why The Parliamentary Review combines political that technology is playing in this sector. It is our great
content with stories from a wide range of organisations honour and pleasure to have helped provide the
– small and large; new and old; those at the peak of platform for these insights to be aired. We hope that
their powers and those who have peaks to surmount. you find these articles – which begin on page 17 with a
It is why these stories seek to inspire and challenge all piece from Willson Grange – as thought-provoking and
who read them. informative as we do.
Rt Hon The Lord Blunkett Rt Hon The Lord Pickles
Co-chairman, The Parliamentary Review Co-chairman, The Parliamentary Review
INTRODUCTION | 3
Andrew Neil
Economy thrives while politics divides
It’s been over two years since the state when it comes to the customs The Parliamentary Review last year,
country voted to leave the European union, the Irish border, immigration is the resurgence of the two-
Union, but Brexit continues to policy and the single market. Only party system in England, another
hang over British politics like an recently, with the Article 50 deadline consequence of Brexit. At the 2017
all-encompassing dark, brooding looming, has some clarity emerged general election, the Leaver Right
cloud, discombobulating established – and not always. I believe this collapsed into the Tories and the
relationships and upturning widespread prevarication has added Remainer Left flocked to Mr Corbyn’s
traditional verities wherever we look. to voter disillusion. Labour party. It is beyond strange that
the two main parties should be doing
Social class no longer largely Just as important, nearly all non-
so well when many regard them
determines how you vote in the UK. Brexit matters have been swept
as weaker, less talented and more
The latest polls suggest the Tories into a Brexit-induced Bermuda
Triangle. This is understandable. But divided than they’ve been in living
now enjoy a lead among working-
class voters. They’ve always won it has added to the gulf between memory. But they got easily over 80
a chunk of working class votes – parliament and the people. per cent of the English vote between
Disraeli called them his “Angels in them in 2017 and all polls since
The impact of Brexit on the suggest that is the new status quo.
Marble” – but never a majority.
parliamentary process has been
As for Labour, even under its generally unpredictable and often The fundamental parliamentary
most left-wing leader ever, it now amusing. Left-wing Remainers now fact in this post-referendum era is
garners considerable support among speak of the House of Lords as a that there is no majority for what
the professional middle classes, bastion of democracy. Right-wing hardliners on either side of the Brexit
especially in the major metropolitan Leavers sound increasingly like divide would like. So, when it comes
conurbations. peasants with pitchforks, determined to determining the eventual shape
to bring the whole edifice of the of Brexit, parliament is very much in
The reason for this psephological the driving seat, as the government
upper house tumbling down.
seachange is Brexit. If you voted has found out the hard way.
Leave, you are now more likely to Jeremy Corbyn, who’s spent his The problem is it’s not sure what
vote Tory; if Remain, Labour. political career railing against the parliament wants that shape to be.
iniquities of the market economy,
Brexit is now the dividing line within Business might despair at what it
now poses as the champion of
Labour and the Conservatives. It splits sees as an increasingly dysfunctional
business (up to a point). Brexiteer
the cabinet and shadow cabinet, political system. But it should
Tories regularly mutter anti-business
backbenchers of both parties and take comfort from the fact that
sentiments in unprintable language.
their voters in the country. The Tory economics and politics are, for the
divisions are more obvious to see Overarching all this turmoil and moment, going their separate ways.
because they are the governing party uncertainty, as I explained in No matter how much you might
and make big news. But Jeremy think politicians are mucking it up,
Corbyn has managed to lose 103 the economy in general and business
frontbenchers, often through Brexit- in particular continue to defy them.
related resignations, which doesn’t
quite have the impact of Boris Johnson I have thought for sometime that
or David Davis walkouts, but must be business and the economy are in
something of a record nevertheless. much better shape than established
opinion would have it. There were
Brexit has also induced something of signs in the early summer of 2018
rigor mortis on both frontbenches. that this was indeed the case. But,
For nearly all of the past by the time you read this, you’ll have
parliamentary year, cabinet ministers a much better idea if I’m right. Keep
and leading Labour spokespeople your fingers crossed – not for my
have been unable to answer the
sake, but for the country’s!
simplest questions on our post-Brexit
Neil believes the two-party system
is the new status quo
4 | ANDREW NEIL
Review of the Year
A year for “tweaking” pensions legislation
tough enough to deal with abuses and
continues to work in the best interests
of those involved – for members and
pensioners, for today’s workforce and
for employers,” she said.
The earlier white paper pointed out
that although most private sector
DB schemes are now closed to new
members and/or new accruals, the
sector remains an integral part of the
UK pensions system. There are around
10.5 million members relying on DB
schemes, and these schemes are
supported by some 14,000 employers.
Esther McVey, Secretary The schemes themselves contain
of State for Work and
around £1.5 trillion in assets, making
Pensions After the huge change introduced
the DB pensions sector a crucial part of
by ex-chanellor of the exchequer,
the UK economy.
George Osborne, with his pensions
freedom initiative a few years back, The main cause of change in the DB
the government has chosen to devote landscape is, clearly, the determination
some time and energy to fine-tuning its of employers to get out from under
approach to both defined benefit (DB) the DB burden, which many now
schemes and Master Trusts. Both have see as wildly disproportionate in
been the subject of consultations over the demands it makes on corporate
the last year. resources. As schemes close and, in a
number of instances, are replaced with
In March 2018 the government
other forms of provision, the changes
produced a white paper looking at
alter the relationship between the
how best to strengthen The Pensions
sponsoring employer and the scheme,
Regulator’s (TPR) enforcement powers
bringing new challenges for trustees
regarding DB schemes. It followed up
and employers. The government is
the white paper with a consultative
determined to manage this change to
document in June 2018.
ensure that pensioners and members
In her foreword to the consultative are not unduly disadvantaged.
document, Esther McVey, secretary of
It is a difficult thing to do, since
state for work and pensions, argued
employers are now highly motivated
that while there was already a robust
to cut the cost to the company of
system in place to protect DB schemes,
providing a pension as part of an
the pensions landscape is a dynamic
employee’s reward package, and
one and requires new powers be given
change almost inevitably entails some
to TPR.
rowing back and diminution of the
“Recent high-profile cases [of company pensions benefits employees can
failures] have highlighted the fact expect. The transition from a DB to
that we cannot be complacent. We a defined contribution (DC) scheme
need to ensure that the DB system is involves shifting the liability risk from
REVIEW OF THE YEAR | 5
THE PARLIAMENTARY REVIEW
Review of the Year
the employer to the employee, with
the employee, in effect, becoming
responsible for ensuring that their
pension pot is sufficient to meet
their needs in retirement. That is a
very different state of affairs than
was the case when employers were
“guaranteeing” that an employee
could retire on an agreed fraction of
their final salary.
Since DB schemes are now clearly
unaffordable in the eyes of virtually all
employers, managing change does not
mean trying to enforce some kind of
Major changes have
parity between what could have been occurred in the work
expected under a DB scheme and what and wants views on – are the power and pensions sector over
employees are now likely to get under to obtain the right information the last 12 months
a replacement DC scheme. Instead, when needed, to deter and punish
what the government wants to achieve wrongdoing, and to open up more
is a strengthening of TPR by giving it possibilities for scheme consolidations,
“tougher, more proactive powers … to where appropriate.
intervene more effectively” where
employers are deemed to be trying to Basically, the government wants TPR to
evade their obligations. be able to be more proactive and to get
involved earlier when employers make
Both the white and green papers changes that could impact the pension
recognise, of course, that the scheme, and to have enough power to
government cannot prevent be able to do whatever needs doing.
insolvencies, and both note that the
It wants:
Pension Protection Fund (PPF) is doing
an excellent job of protecting the » Clearer scheme funding
benefits of scheme members that fall
» A revised and enforceable Funding
into the PPF as a result of employer
Code of Practice
insolvency.
» To make it mandatory for scheme
As at March 2017 there were some sponsors to inform TPR about a wider
130,000 members in the PPF receiving range of corporate events
benefits and another 110,000 deferred
» Sponsors to be required to tell TPR
members not yet in receipt of benefits.
what they are doing to mitigate
Those who were already receiving
impacts on the fund (the government
their pension when their fund fell into
is proposing a civil fine of up to £1
the PPF receive 100 per cent of their
million for breaches).
accrued benefit; those not yet in receipt
will get 90 per cent when they go on It also wants criminal sanctions if
pension. However, the white paper schemes do not give TPR the right
makes clear that only 2 per cent of DB information at the right time.
scheme members, as of March 2017,
Clearly, these are serious additional
were in the PPF.
powers for TPR, and it will be
The additional powers for the interesting to see what the year ahead
government says it is considering – brings.
6 | REVIEW OF THE YEAR
WORK & PENSIONS
Master Trusts – how things are changing
Master Trusts provide an easy way
for multiple employers to fulfil their
mandatory duty of offering occupational
DC pension schemes to qualifying staff.
By December 2017 there were some
87 Master Trusts in the UK and
between them they look after the
retirement funds of 90 per cent of
the eight million savers so far enrolled
through AE, according to Professional
Pensions journal. The Department for
Work and Pensions has now crafted
an authorisation and supervision
regime to ensure that existing and
The Department for future Master Trusts are fit for purpose
Work and Pension’s
regime regarding Master
and provide scheme members with
Trusts is due to launch in The 2017 Pension Schemes Act received equivalent protections to those enjoyed
October 2018 royal assent on April 27, 2017, and by members in other occupational
came into force officially on February schemes. The regime is expected to
1, 2018, giving TPR tough new powers launch in October 2018.
to supervise Master Trusts. These are
multi-employer occupational schemes To be authorised, a Master Trust will
where each employer has its own have to meet five criteria. It must be run
division within the master arrangements. by fit and proper persons, be financially
Their attraction is that they offer a stable, have scheme funders that meet
governance function to employers specific requirements, be run effectively
with generally low running costs and and have a continuity strategy. If TPR
are generally easier to run than single judges that an existing trust does not
employer pension schemes. (See the meet these criteria, it will be wound up
section below on Master Trusts.) and its funds and members transferred
to another scheme.
Up until the Act, Master Trusts had
escaped regulatory scrutiny despite Getting authorised won’t be cheap.
the fact that the number of such trusts New Master Trusts will have to pay a fee
has grown significantly since auto- not exceeding £24,000 and existing MTs
enrolment (AE) was introduced in 2012. will face fees not exceeding £67,000.
Auto-enrolment marches on
In July 2017 The Pensions Regulator back in 2012. As TPR noted, back
(TPR) published its “commentary in 2012 the road ahead for auto-
and analysis” of the way employers enrolment “was one peppered with
had adapted to, and adopted, auto- potential capacity crunches” and
enrolment in their organisations. This was one where the sheer volume
was the fifth such report TPR has of employers having to be brought
done, with auto-enrolment having on to the scheme “threatened to
begun for the largest employers overwhelm us”.
REVIEW OF THE YEAR | 7
THE PARLIAMENTARY REVIEW
Review of the Year
In reality, TPR pointed out, things have
gone rather more smoothly than was
anticipated, thanks to the practice of
staging the adoption process, based
on employer size, with the largest
going first. “By the end of March
2017, seven million workers had been
successfully automatically enrolled into
a workplace pension and more than
500,000 employers have completed
their declaration of compliance over the
same period,” TPR says in its report.
The task before it, as of March 2017,
was how best to steer more than
700,000 small and micro-employers
through their workplace pension
duties. This process came to an end
in February 2018, when all businesses
with a pre-allocated staging date were
supposed to be up and running and
compliant.
By March 2017, seven
With quite a bit of legislation and million workers had
government scrutiny being directed Checker in the last year,” TPR says. been successfully
Over 1.08 million visitors looked at automatically enrolled
at Master Trusts, as has already been
into a workplace pension
noted, TPR made it clear that Master TPR AE employer web page, and TPR
Trusts have played a valuable role in held some 300 speaking engagements
helping the consolidation of defined across the UK over the last year.
contribution (DC) schemes. “These
One of the more onerous duties on
are one of the most effective ways for
employers is the need to re-enrol staff
members to save into secure and well-
who opted out the first time round.
run schemes,” TPR says.
Re-enrolment duties occur every
TPR emphasises in its July 2017 report three years for every employer. “We
(the 2018 report had not yet appeared started communicating with large
at the time of writing), that it is doing employers on re-enrolment based on
all it can to help employers deal with their third year AE anniversary date.
the duties imposed on them by AE. As more employers now start to have
It has online tools and animated help re-enrolment duties, we launched
and guidance on its web pages. “Our a new step-by-step guide taking
online tools remain popular, with over them through the steps they need to
378,000 employers using our Duties complete, and by when,” TPR says.
Pension Protection Fund makes a surplus
despite hard times
A spate of high-profile company position through 2017 to 2018. In its
failures has not prevented the Pension report and accounts for the year ending
Protection Fund (PPF) from growing March 31, 2018, the PPF reported
its reserves and improving its funding a £6.7 billion surplus, up almost
8 | REVIEW OF THE YEARWORK & PENSIONS
10 per cent on the prior year. The PPF average return of the fund over the
manages over £30 billion in assets and last three years has been 2.7 per cent,
has over 250,000 members. decently ahead of its target figure of
1.8 per cent over Libor.
The improvement in funding levels is
despite the fact that the fund had to Commenting on the results, the PPF
absorb some £1.2 billion of funding chief financial officer, Andy McKinnon,
shortfalls in the pension schemes said: “Our success over the past year
of failed companies. The failures has come amid a backdrop of political,
include Carillion and Toys “R” Us, and regulatory and economic uncertainty,
represent the biggest hit the PPF has so I am pleased to report that we have
had to endure since it was established achieved such strong financial results.”
in 2005. At the time there were dire
Arnold Wagner, the chairman of
warnings that the PPF would turn into
the PPF, commenting on the task
a “black hole” as the pension schemes
carried out by the fund, said: “We’re
of more and more failed companies
acutely sensitive to the anxiety many
tipped into it.
employees inevitably feel if their
Through the last financial year the employer becomes insolvent. Although
report and accounts show that the PPF we can’t protect their jobs, I am proud
started paying benefits to more than of how effectively our employees
65,000 new pensioner members. Some respond. We reassure those with DB
46 schemes transferred to the PPF pensions that the PPF protects them
through the year. This number includes under the terms of the Pensions Act
those transferred to the fund as part 2004 that established us.”
of the restructuring of the British Steel
Pension Scheme. Without the PPF, he pointed out,
insolvencies would mean that many
A good part of the reason for members of DB schemes would suffer
The PPF had to absorb the improvement is that the PPF’s very serious reductions in their pension
some £1.2 billion of investment portfolio outperformed its benefits and, too often, the loss of
funding shortfalls in
the pension schemes liabilities by 3.2 per cent, bringing its their entire accrued benefit, which
of failed companies, funding ratio to 122.8 per cent. The would have a disastrous impact on their
notably including Toys
financial security in retirement.
“R” Us
The PPF gained a new CEO from the
start of the financial year. On March
19, Oliver Morley joined the PPF from
his position as CEO of DVLA, a post
he has held since 2013. Commenting
on Morley’s appointment at the time,
Wagner said: “He brings to the role
proven leadership skills, recognised
success in engaging with stakeholders
and a strong focus on the needs of
customers. We have a proven team at
the PPF and his leadership will ensure
that the PPF enters the next phase of its
development well placed to continue
to protect the millions of people in
the UK who belong to defined benefit
pension schemes.”
REVIEW OF THE YEAR | 9THE PARLIAMENTARY REVIEW
Review of the Year
WPC inquiry into “Defined Ambition”
pension plans
In late November 2017 the Work
and Pensions Committee (WPC) in
the House of Commons launched its
own inquiry into Collective Defined
Contribution (CDC) pension schemes.
These schemes are not yet allowed in
the UK but are in widespread use in the
Netherlands, Canada and Denmark.
They were trailed as a concept in
legislation passed in 2015 but were not
cleared at the time.
As the name suggests, CDCs are a
The Work and Pensions
type of retirement savings plan and Select Committee,
have the potential to address some On the down side, those against CDCs chaired by Frank Field,
of the concerns that policymakers argue that they run counter to the has launched its own
inquiry into CDC
and the public have about DC funds. current trend towards giving individuals pension schemes
Another name for CDC schemes is greater freedom with their pensions.
“defined ambition schemes”. The The committee’s thinking, however,
major difference between them and was summed by its chair, Frank
traditional DB schemes is that members Field: “What the Select Committee
are not promised a certain retirement is aiming for is to retain some of the
income. Instead the scheme targets, or best features of company schemes in
has the ambition to pay, an adequate a different age when employers are
level of index-linked pension for the life no longer willing or able to sustain
of the pensioner, but that is an aim, the burden of final salary promises to
not a contractual guarantee. See the employees, who could club together
difference? and pool the risk themselves”.
At the same time, they are different Since the committee’s enquiry, things
from standard DC schemes, which have moved forward fairly dramatically.
produce an individual pension pot. The In January 2018, Royal Mail offered to
savings are invested in a collective pot, help draft the new regulations required
and this pays out benefits to members. to bring CDC schemes into the UK.
One of the interests CDC schemes For Royal Mail, CDCs offered a way
offer to government, the WPC points of resolving a long-running pensions
out, is that these schemes tend to like dispute with tens of thousands of staff.
infrastructure investments, which are
The importance of Royal Mail’s offer
long term but pay a reasonably secure
is that introducing CDCs requires
return.
secondary legislation that would take
On the plus side, the committee months to write. Offering to take that
notes, CDC schemes provide greater burden off the government’s shoulders
assurance of retirement income and was inspired thinking. When the WPC’s
more efficient pooling of risks and costs report into its inquiry into CDCs was
than traditional DC schemes. At the finally published in July 2018, the
same time they do not impose onerous committee explicitly commended Royal
pension promises on employers. Mail and the union for their initiative.
10 | REVIEW OF THE YEARWORK & PENSIONS
“We congratulate Royal Mail and of constructive industrial relations,
the Communication Workers Union it opens the door for CDC to move
on their groundbreaking agreement from abstract idea to practical
to pursue the creation of a collective reality. This could transform the UK
defined contribution (CDC) pension private pensions landscape,” the
scheme. As well as being a model committee said.
2017-18 sees steady improvement in DB
funding levels
TPR publishes monthly figures on the By the end of June 2018 the deficit
totality of the funding deficit for all UK was down still further, to £85.6
DB schemes combined. In December billion, having shot up in May, as a
2017 TPR reported that the aggregate consequence of stock market turmoil,
deficit of the 5,588 schemes in the PPF to £94.0 billion. Total assets were
7800 Index shrank from 87.7 billion at £1,606.9 billion and total liabilities
the end of October to £87.6 billion by were £1,692.5 billion.
the end of November.
The Taylor review and the gig economy
work over the last decade have left
“traditional” employment law trailing
in the dust. It is pretty clear to most
people, in government and out, that
change is required to bring UK law into
line with current practices. The Taylor
review was a first stab at coming up
with recommendations.
Taylor makes a number of
recommendations, but the one that
got the most media attention was
his suggestion that workers for firms
The Taylor Review was
commissioned by the such as Uber and Deliveroo should be
government to look In July 2017 Matthew Taylor, chief classified as dependent contractors,
into modern working with extra benefits.
executive of the Royal Society of Arts,
practices
published his “independent review of
For Taylor himself, the thing that
modern working practices”. Taylor was
came out most strongly was what he
asked to consider the overall implications
termed “one-sided flexibility in favour
of new forms of work on worker rights
of employers”. “One-sided flexibility is
and responsibilities, as well as on the
where employers seek to transfer all risk
obligations and freedoms of employers.
onto the shoulder of workers in ways
As the law firm, Brodies, notes in that make people more insecure and
its summary paper on the review, makes their lives harder to manage. It’s
there is a general consensus among the people told to be ready for work or
both employers and employees that travelling to work, only to be told none
the transformations we have seen in is available,” he said.
REVIEW OF THE YEAR | 11THE PARLIAMENTARY REVIEW
Review of the Year
The Taylor report went down well with including employers’ national insurance
both government and the media, but (NI) contribution, which is a payroll tax
some of his recommendations look by any other name, the more incentive
either like non-starters, or sound like there is for employers to utilise the
well-meaning platitudes, such as his gig economy instead of giving people
recommendation that government
permanent jobs. However, both the
introduce a national strategy to
levy and NI are very much here to stay
provide good work for all. He also
for the foreseeable future.
wants government to “avoid further
increasing the non-wage costs of Another point he made was that it
employing a person, such as the would be better if cash jobs were
apprenticeship levy”.
phased out. The cash economy is worth
Taylor’s reasoning is clear; the more some £6 billion a year, much of which
of these non-wage costs there are, is “off-the-books” and escapes tax.
Moving on from the Taylor review
Taylor succeeded in provoking a
number of detailed responses. His
recommendations were then the
subject of a joint report, published
in November 2017, by two House of
Commons committees, the Work and
Pensions and the Business, Energy and
Industrial Strategy committees.
The nub of the problem that both
Taylor and the committees are
addressing is very clearly stated in
the latter’s preamble to the report.
“[There are] concerns that changes in
the world of work, while contributing
The expansion of
to Britain’s prosperity, have also driven self-employment
the growth of a vulnerable workforce. the recommendations are bound to provides opportunities
The expansion of self-employment and for workers as well as
be taken seriously by government
exposing some to extra
business models built around flexible when – and if – it gets time to draft vulnerabilities
work on digital platforms promise legislation on the matter. At the
positive opportunities for entrepreneurs, time of writing the Conservative
workers and consumers alike. But these government was heavily split over
changes also create confusion about the Theresa May’s Chequers plan for Brexit,
rights and entitlements of workers, and which envisages Britain staying in the
add to the potential for exploitation. EU’s customs union. This is totally
Evidence tells us this exploitation is unacceptable to many in the “Leave”
already occurring.” camp and caused a number of senior
ministers to resign in protest, including
This being the case, the committees
the Brexit minister, David Davis, and the
set out in their report to advise
foreign secretary, Boris Johnson.
government on the steps they think
are needed to address the problem. With May’s continuing role as prime
This is not of itself legislation, but minister uncertain and with the
12 | REVIEW OF THE YEARWORK & PENSIONS
committees is that employment
legislation up to this point in time has
focused solely on bona fide employees,
those who are indisputably employed
by a company and are thus covered
by legislation defining employee and
employers’ obligations and duties.
The self-employed are manifestly not
covered by employment law.
The committees are unequivocal in
stating that government needs to close
It is estimated that the loopholes that enable what they term
gig economy employs
“dubious business practices”. In the
around 1.3 million government in turmoil, it is impossible
people in the UK words of the committees’ report:
to see when parliamentary time
could be allocated to bring forward “Recent court cases have exposed a
any new legislation. Nevertheless, pattern of companies using bogus
the committees’ report remains an self-employed status as a route to
important guide to political thinking cheap labour. Implementing a model of
on how to protect workers in the gig worker status by default for companies
economy. with substantial dependent workforces
currently labelled as self-employed
That the issue needs addressing can
would better protect such workers. The
be seen from the fact that according
onus would be on the firm to prove
to the committee report there are
self-employed status, when disputed,
900,000 people in the UK on zero
rather than on the worker to do so
hours contracts, and some 1.6 million
through the courts.”
temporary and agency workers. The gig
economy is estimated to employ some As a measure this looks rather more
1.3 million people. promising, as does the suggestion that
companies who lose a second tribunal
The committees held evidence sessions
case on these issues, having lost the
with both Matthew Taylor and Professor
first already, should be subject to higher
Sir David Metcalf, the government’s
fines. “Changes to legislation to enable
director of labour market enforcement,
class actions to establish employment
as it pondered the next steps.
status would also minimise the
The issue facing Taylor, the government burden on individual workers,” the
and the House of Commons report argues.
Consultation on agency workers
In February 2018, the government recruitment sector plays an important
introduced another consultation role in ensuring the smooth working
stemming from the Taylor review, of the UK labour market, mediating
namely its consultation on Taylor’s as it does between employers seeking
recommendations with respect to workers and people seeking work.
agency workers. Employment agencies who introduce
people to hirers, and employment
The review made a number of agencies who engage people to work
recommendations in this area. The on temporary contracts for third parties,
consultation points out that the are both covered in the consultation.
REVIEW OF THE YEAR | 13THE PARLIAMENTARY REVIEW
Review of the Year
There is already a robust regime in The consultation was seeking views
place, with the sector being regulated on whether the government should
by the Employment Agencies Act 1973 amend the 1973 Act to improve the
and a code of practice set out in the transparency of information, and
Conduct Regulations. The regime is perhaps have the director of labour
enforced by the Employment Agency market enforcement extend or alter the
Standards (EAS) Inspectorate. Taylor remit of EAS.
wanted to see more clarity on who The consultation also sought views on
was responsible for paying temporary whether the government should repeal
workers and clarity on the rates of pay the legislation that allows work seekers
and any deductions. At the same time, to opt out of equal pay entitlements
any changes introduced have to ensure (known as the “Swedish Derogation”).
that work seekers remain confident in The closing date for the consultation
using the sector. was May 9, 2018.
The Director of Labour Market
Enforcement Strategy for 2018-19
In May 2018, David Metcalf, the
director of labour market enforcement,
published his first strategy document,
to cover the period from 2018 to 2019.
As with the Taylor review, Metcalf
takes as his starting point what he calls
the “profound changes” in the labour
market over the last four decades. “The
employment relationship has fissured
and the average workplace size has
fallen. Trade union membership, the
coverage of collective bargaining and
labour’s share of our national income
have all declined markedly. Hand in
hand with such changes came the
realisation that labour market laws
and regulations are not being fully David Metcalf has
pointed to the
enforced,” he says.
Metcalf undertook a consultation on “profound changes”
the directorate’s strategy in the summer that the British labour
Metcalf was appointed to this newly market has seen over
created post in January 2017. His remit and autumn of 2017. His approach, the last four decades
covers the national living/minimum he says, is based on the principles that
wage, the Gangmasters and Labour have influenced enforcement policy
Abuse Authority and the Employment in countries such as the US, Canada
Agency Standards Inspectorate. His and Australia. He expects to prioritise,
remit covers the whole spectrum of based on the probable level of severity
labour market non-compliance, from of problems, to ensure deterrence
errors of omission through employer and that enforcement has a long-
ignorance to outright criminal term, sustainable effect on employer
exploitation of workers, from low level behaviour and that each layer of an
to the most severe offences. industry is affected by enforcement.
14 | REVIEW OF THE YEARWORK & PENSIONS
He points out that getting a grip on the suggests that some £4.7 billion is
real data about non-compliance has its misappropriated from agency workers
challenges. You can’t rely on worker each year, the equivalent of 15 per cent
complaints alone, as barriers such as of the agency industry turnover.
a lack of awareness of employment
Among the remedies he suggests are
rights, and fear of reprisals from the
the right to a payslip for all workers,
employer, are significant. However,
showing total hours worked and the
based on statistics from the Office for
hourly rate of pay, and improving the
National Statistics (ONS), it is likely that
complaints channel. He also wants
some 342,000 jobs across the UK were
better information on rights including
paid below the national living wage in
a statement of rights to be produced
2017. This amounts to around 1.3 per
on week one of a person taking up
cent of all employee jobs. The unpaid
employment or agency work.
wages bill amounted to some £3.1
billion for the full year 2016 (the 2017 Metcalf was also worried by the
figures are not yet available). Around perceived low risk of an investigation by
half this sum is thought to be unpaid enforcement officers. He also feels that
holiday pay. the scale of financial penalties for those
found to be non-compliant is too low.
Metcalf points out that figures
estimated by one stakeholder, He plans another consultation to
supported anecdotally by others, inform his 2019-2020 strategy plan.
Hermes judgment yet another landmark
case for the gig economy
and holiday pay. The GMB union hailed
the judgment as a “landmark” ruling
for the gig economy. Tim Roache, the
GMB general secretary, was reported
as saying: “This is yet another ruling
that shows the gig economy for what it
is – old fashioned exploitation under a
shiny new façade.
“Bosses can’t just pick and choose
which laws to obey. Workers’ rights
were hard won; GMB isn’t about
to sit back and let them be eroded
or removed by the latest loophole
In June 2018, an
employment tribunal employers have come up with to make
ruled that a group of 65 In June 2018, in yet another seminal a few extra quid,” he commented.
Hermes couriers were judgment for the gig economy, an
workers rather than self-
employment tribunal ruled that a group The judgment has implications for
employed contractors some 14,000 Hermes couriers across
of 65 Hermes couriers were workers
the UK. Frank Field MP, and chair of
rather than self-employed contractors.
the Work and Pensions Committee,
The couriers took Hermes delivery himself the author of a scathing report
service to the tribunal claiming that on working conditions at Hermes, said
they had been denied basic workers the ruling “ranks among the most
rights, such as the national living wage substantial judicial interventions ever”.
REVIEW OF THE YEAR | 15THE PARLIAMENTARY REVIEW
Review of the Year
A Hermes spokesperson said that the Association of Independent Professionals
ruling was likely to be appealed. “It and the Self-Employed, said it was
goes against previous decisions, our unacceptable for policymakers to rely
understanding of witness evidence and on costly, time-consuming court cases
what we believe the law to be,” the as the first port of call in determining
spokesperson said. The Independent employment status. Uncertainty about
newspaper reported that Simon who is, and who is not, self-employed,
McVicker, director of policy at The needs to stop, he said.
Scotland introduces its own additional
income tax bands
The start of the new tax year on April 6,
2018, saw the new Scottish income tax
system coming into force. The Scottish
parliament gave the nod to the tax
band changes alongside the Scottish
government’s budget in February.
The Scottish finance secretary, Derek
Mackay, called the new system “more
progressive” but others have warned
that it could trigger a move south of
the border of a significant portion
of Scotland’s wealthiest residents.
The change sees the end of Scotland
mirroring the Westminster parliament’s
three tax bands of a basic rate at 20
The Scottish Parliament
per cent, a higher rate of 40 per cent voted to introduce
and a 45 per cent top-rate band. An article in The Scotsman pointed out different income tax
that many wealthy Scottish families bands from the rest of
Instead, Scotland now has a 19 per Britain
have second homes and other property
cent starter rate for those on low
elsewhere in the UK and changing
incomes, the standard 20 per cent
their designated place of residence
band and a 21 per cent band for those
would be relatively straightforward and
above the median salary. It also adds a
inexpensive for people in that position.
percentage point to the higher and top
rates, which now stand at 41 per cent MacKay argues that the changes, taken
and 46 per cent respectively. together with the expected increase in
the tax-free allowance across the UK,
According to Mr Mackay, the tax
means that around 70 per cent of Scots
changes are projected to add an
taxpayers will pay less in 2018/19 than
additional £219 million, which will be
they did in 2017/18.
a boost to the Scottish Treasury coffers
without the need for cuts in other Many of the concerns mentioned above
services. However, market watchers are are alighted on in the following articles
warning that the Scottish government from this year’s Parliamentary Review
could lose at least that much in representatives, who give their personal
lost taxes if a modest proportion of take on how political policies and the
Scotland’s wealthiest citizens move. economic climate are affecting them.
16 | REVIEW OF THE YEARWORK & PENSIONS
Willson Grange
New headquarters (far right) for Willson
Grange on Liverpool’s waterfront
Stuart Willson, CEO
W
illson Grange is a wealth management company
based on the Wirral, Merseyside. Founded in 2000,
the company is preparing for a move to new offices
on the Liverpool waterfront in September 2018 and the launch
of a new wealth management career development centre. CEO
FACTS ABOUT
Stuart Willson discusses how they are planning for the future in Willson Grange
order to meet the needs of the next generation of clients. »» CEO: Stuart Willson
»» Established in 2000
Since our last entry in The Parliamentary Review in 2016, we have continued to »» Based in Wirral, Merseyside
meet the challenges of the sector head-on. Total funds managed on clients’ behalf »» Services: Advice on investment
now total £420 million, from the £300 million as reported in 2016. management, inheritance
and estate planning, tailored
Like any growing business in this sector, we are now having to think hard about
advice for retirement and
the future. Our focus is on ensuring that we retain our clients’ confidence and
later life, corporate financial
continue to develop our services. As some of our current team of long-established
planning and protection for
advisers approach their own retirement age, we will need stringent plans in place
families
to allow the company to grow and prosper.
»» No. of employees: 45
Developing our sector »» Funds under management:
£420 million
Looking closely at the nation’s future wealth projections, we can see a real need »» 4,000 clients in the UK
to create the next generation of advisers. Research commissioned by St. James’s
»» www.wgcfp.co.uk
Place Wealth Management and undertaken by Capital Economics (published June
2017) shows us that there is an estimated £6.6 trillion of wealth held by people
aged 55 and over in the UK – of which some £920 billion will be gifted to younger
generations over the next three decades. It’s an unprecedented situation, yet we’re
facing a real shortage of financial advisers at the same time.
WILLSON GRANGE | 17THE PARLIAMENTARY REVIEW
Highlighting best practice
“
Because of increased regulation and professionals who are motivated and in
advisers retiring from the sector, touch with a new generation of savers.
Research the number of Financial Conduct
shows us that Authority (FCA) registered practitioners
has declined sharply in recent years.
Better focus
there is an According to moneymarketing. Willson Grange now regularly helps
co.uk “Tackling the crisis in adviser more than 4,000 clients to build
estimated recruitment” (December 2016), adviser and protect their finances through
£6.6 trillion of numbers have reduced from 250,000
in 1990 to less than 25,000 today.
a carefully managed portfolio of
investments and protection policies,
wealth held by These are quite staggering statistics,
including pensions, ISAs, life assurance
and trusts. Towards the end of 2017,
people aged when you consider that, according to
we strengthened these offerings while
the Financial Reporting Council’s ‘Key
55 and over in facts and trends in the accountancy
developing a succession plan that will
carry us forward for decades to come.
the UK – of profession’, (July 2017) and the
Solicitors Regulation Authority’s Part of that plan is the new Willson
which some “Population of practising solicitors Grange Wealth Management Career
from July 2009 to Dec 2017”, there
£920 billion are more than 350,000 registered
Development Centre, which will
become fully operational in September
will be gifted accountants and 140,000 solicitors
nationwide. We have to consider
2018. Based in modern office space
on Liverpool’s new waterfront
to younger where future financial advisers are development, Princes Dock, the centre
generations
over the next
“ coming from. We don’t just mean the
highest-qualified, we mean the client-
friendly advisers, who understand
families’ individual circumstances and
will enable suitable trainees to qualify
and register as wealth managers and
to build up their own business. We
expect our intake numbers to grow
three decades can translate their expert knowledge year on year.
into what they need to know.
A structured three-phase programme
Exacting new standards and regulation allows carefully selected trainees to
are crucial of course, but to keep study for professional qualifications,
those standards going well into the gain practical experience and achieve
future, there is a real need for younger FCA registered status, typically over
The need for qualified two years. Trainees benefit from
wealth management
advisers is growing tailored coaching from established
Willson Grange advisers with field-
based experience of working with
real clients, while they will also be
encouraged to develop a personal
marketing plan for building their
own wealth management business in
the future.
We are not looking necessarily for
skills and experience gained within
the financial services sector. What
is most important is that our future
advisers come to us with a well-
rounded background, transferable
skills and core values that enable them
to succeed in a sometimes tough, but
very rewarding, profession.
18 | WILLSON GRANGEWORK & PENSIONS
Wealth management requires the
construction of a trusting relationship
between adviser and client. A wealth
manager will aim to stay with their
client throughout their life, helping
them and their family to adapt to
changes in the economy as well as
to changes in their own personal
circumstances, their current ambitions
and future needs. It’s a profession that
relies on a high degree of caring and
understanding among its practitioners
as well as sound financial knowledge.
Challenges
The social and financial landscapes
Trainees will gain FCA
have changed significantly over registered status typically
the past 20 years. People are, on As we’ve mentioned, the millennial over two years
average, living longer; they are leading generation will be beneficiaries
more active lives beyond traditional of £920 billion over the next 30
retirement age, and as such will need years. Wealth management for this
their money to work harder for them generation will be quite different to
to enjoy their later years. that of older generations. This is the
first generation to have grown up fully
Relying on a state pension is no longer
“
immersed in, and fully embracing, our
an adequate option for many people. digital world. Mobile services such as
Individuals and families will want and
need expert and trustworthy advice
Paym, Apple Pay and Android Pay are Most millennials
becoming more frequently used, and
to help them plan out their finances traditional methods such as cash and still regard the
and put them on a secure footing for
the future.
cards are being left behind.
human touch as
Over the coming decades, it’s expected
It’s something of a relief, then, to find
that most millennials still regard a
more important
that there will be significant levels of human touch as being more important than technology
wealth transfer. While young people than technology when it comes to
may have money coming their way, it financial advice and critical investment when it comes
doesn’t necessarily mean they can use
it freely or frivolously. They need the
decisions. to financial
patience, the will and the know-how A 2017 survey by the Legg Mason
Global Investment group saw 53 per
advice and
to make it last, potentially for their
entire life. They will need to learn to
save and plan, to make sure they don’t
waste the opportunities they have
cent of 18 to 35-year-olds agreeing
with the statement, “personalised
customer service is important and
critical
investment
“
been given. you can never replace that with decisions
technology”. Most millennials still
regard the human touch as more
The human touch important than technology when it
With the advance of algorithms and comes to financial advice and critical
robot technology in the modern investment decisions. This is why
financial world, it’s good to know that retaining our human touch is more
young adults still want face-to-face important than ever.
advice from a living, breathing expert.
WILLSON GRANGE | 19THE PARLIAMENTARY REVIEW
Highlighting best practice
Beacon Wealth
Management
B
eacon Wealth Management, founded in 2001, was the first
chartered financial planning company in Cambridgeshire.
With approximately £150 million worth of funds currently
under management through their in-house discretionary
investment team, Beacon have won a number of awards and
earned praise from the community for their range of ethical
investment options. Owner and managing director Tony Larkins
discusses the growth of the young firm and explains how an ethical
and community outlook is an important aspect of their ethos.
At Beacon, we are not only proud to be the first chartered financial planning
company in Cambridgeshire, but also to play an important role in our community
as a local business. We were established in 2001 as a financial advice firm, working
on a commission basis, but we diversified our services in 2010 and became a
Tony Larkins, owner and wealth management practice, working on pre-agreed fees. Of our management
managing director team of five, four are chartered in their respective fields and all five have been with
the company for over ten years.
Our services
Currently we offer financial planning for pensions and retirement, employee
FACTS ABOUT benefits, savings and investments, long-term care, estate and inheritance planning,
BEACON WEALTH mortgages, separation and divorce and personal and corporate protection. From
MANAGEMENT our current team of 24, there are only four who work as financial planners. Of this
small group of dedicated professionals, one concentrates on mortgages, one on
»» Owner and managing director:
employee benefits and two on financial planning. The business has seen continued
Tony Larkins
growth in fees and income since 2008, while we have also increased the number of
»» Established in 2001 funds managed and staff.
»» Based in Kimbolton,
Cambridgeshire To us, financial planning is about helping our clients identify short, medium and
long-term financial goals. These may be big events such as having a child, getting
»» Services: Independent
married, paying off a mortgage or retirement. For many clients, however, it is simply
financial planning and wealth
about living comfortably or reducing their family’s exposure to inheritance tax.
management
»» No. of employees: 24 Our role at Beacon is to help our clients achieve their goals through the creation of
»» www.beaconwm.co.uk feasible and attainable financial plans. By analysing their current situation, we can make
it clear from the outset which of their objectives are realistic. Once a plan is in place, we
can help track their progress and continue to offer them advice going forward.
Our funds are managed through ten different risk rated portfolios, five of which are
ethical and five of which are whole of market. In 2017, according to FE analytics
data, our moderate-risk whole-of-market portfolio had the best returns – 12.9 per
cent – out of all 140 listed funds in the same category. The same data also revealed
that our more cautious ethical investment portfolio recorded returns of 10.9 per
cent, which was again better than all other comparative funds.
20 | BEACON WEALTH MANAGEMENTYou can also read
