The politics of pensions – how the landscape has changed since 2010.

city rip offIn retrospect, the May 2010 General Election was momentous for British Pension Policy.

The loss of his Eastbourne seat by Nigel Waterson opened a door to Steve Webb that had been kicked ajar by the failure of the Conservatives to get an overall majority. Looking back at the series of blogs I wrote at the time, at first fearful and then jubilant at Steve Webb’s appointment, I clearly called it right.

What I hadn’t anticipated was the collapse of right wing commentary nor the rise of a credible alternative to Webb-enomics from Labour.

So we commence our glide path to the 2015 election with the pension political landscape dominated by Steven Webb, with Ian Duncan Smith his ongoing mentor and the protector of the faith.

Steve Webb will be remembered ,many generation of ministers hence, for the man who had it all. A clear strategy, the capacity to bring people with him and the perseverance and strength of character to stand up to the Treasury.

His two lasting monuments will be the reformed state pension and the implementation of auto-enrolment. Both have unstoppable momentum and will change the pension landscape as radically as the introduction of personal pensions did in 1987 – and the launch of SERPS in 1978.

The achievement of reforming the basic state pension cannot be underestimated. It creates a simpler structure which will be seen as fairer, it deals with demographic change effectively and it reduces the issues for the low-waged entering funded pensions through auto-enrolment.

The Webb reforms to auto-enrolment are no less significant. He skilfully took on the baton of a labour initiative in 2010 and has stuck , by and large, to the original conception. The project has been beset by local difficulties, not least the over-elaboration of legal safeguards by his own department which have led to some claiming AE is unworkable for SMEs.

But a pragmatic Minister, assisted by an exceptional team at tPR, strong support from NEST and the help of the private sector who have really rallied round, has kept the original vision intact.

Webb’s been lucky to have had Bill Galvin at the Regulator in the first three years of his tenure. Losing Bill to the private sector is a grievous loss to pensions but we can be comforted that he has in Charles Counsel and Andrew Warwick-Thompson, two excellent heads while we await the appointment of Bill’s long-term successor.

There are of course a few failures, the relentless pursuit of the member by the pot will end in failure. NEST has been left to fester under a series of restrictions that render it less fit for purpose than it could or should be. In particular, the DWP’s failure to engage in NEST’s most critical deficiency, its incapacity to provide support services to payroll and HR departments must be addressed urgently if it is to pick up the strain of the 2015+ stagings.

Webb has also been dilatory in imposing minimum standards on workplace pensions being used for AE.

Which is where Gregg McClymont comes in. Gregg is a fine fellow who has made friends of the industry through his tireless PR assault. His big idea is that charges wreck pensions , he is a champion for NEST and he is interested in the mechanics of DC in a way that Webb isn’t.
Unusually for a Shadow Minister, he seems to be helping the Minister not hindering him.

By getting the OFT in, he has forced Webb to take action on minimum standards. His campaigning for lower charges has picked up on work by the Fair and True Campaign and By David Pitt-Watson and friends.

Webb and McClymont’s work seems to coalesce around a common purpose of making DC something more collective. In this they are left-leaning pointing private pensions towards existing mutual models rather than the for-profit approaches that have prevailed since the days of Thatcher.

This leads me to the rather sad and limp display this term from the right. Gone the bravura of the Adam Smith Institute fifteen years ago. They’ve been replaced by Michael Johnson’s increasingly desperate attacks on the public sector and the tax and decumulation systems that underpin the status quo. If Johnson speaksfor the conservatives, there is much for pension people to fear from a conservative win in 2015.

The conservative vision of personal empowerment has slowly drifted away. The default concept that underpins auto-enrolment is a tacit admission that we have failed to engage the British public in pension decision making. The vision of a nation taking pride in self-reliance has all but disappeared leaving most conservatives scratching their heads about pensions.

It would be a great shame if the conservatives were to turn against all the constructive work done by this and the previous Government and stop auto-enrolment in its tracks, I don’t think it will happen because of the momentum established by low opt-out rates and the participation of most (though not all) of the major financial institutions involved in pensions.

I’ll stop short of discussing policy towards defined benefits. Other than the guaranteed annuity, the issues surrounding defined benefits are increasingly arcane. De-risking continues apace in the private sector and before long most companies will feel immunised against most economic, political and market risks that can impact their legacy schemes. Where Webb has intervened , it has been to highlight the more blatant “sexycash” offers and by and large both he and McClymont seem happy to allow the pensions industry to sort this out for themselves without further tampering.

The assault on public sector pensions has once again fizzled out in the face of staunch opposition from the Unions and in recognition of the ongoing pay freeze for most public sector workers which is reducing the Treasury’s current and future liabilities towards its own.

The PPF has proved that the State can run a pension fund.

The political agenda is with the new DC that is emerging from auto-enrolment. It is a world with much leaner distribution, lower levels of “advice” and an increased reliance on digital delivery.

Pensions has come a long way under Webb, further than it would have done because of McClymont. The conservative agenda is in tatters and will have to be rebuilt around the new reality of a reformed pension and welfare system and a new architecture for private pensions.

Let us hope that the head of steam that has been built up since 2010 can be maintained.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in advice gap, annuity, auto-enrolment, Financial Education, First Actuarial, NEST, pensions, steve webb, workplace pensions and tagged , , , , , , , , , , . Bookmark the permalink.

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