I am stuck in the middle of Scotland, it is April and I am snowed in high above Loch Rannoch. Tired of walking through blizzards I am attending to my e-mails which includes a missive from my friend Steve (the Pension) Herbert.
Steve, Jelf’s thought leader has come out in favour of a Pension Commission, as has Malcolm Mclean, as has the DWP Select Committee.
“We recommend that the next Government take steps to establish an independent pension commission at an early date after the General Election and certainly by July 2015.”
I do not agree with any of them. We need a pension commission like my computer needs another firewall. As Steve Webb points out “it will only slow legislation down “.
There has been a false consensus for the past five years between the DWP and the Treasury. Steve Webb has been able to sweet-talk auto-enrolment past the Treasury and Business and Skills despite it adding to the red-tape agenda and draining George’s coffers with up front tax-relief.
George Osborne has been able to pull pension bunnies from the budget hat and Steve Webb has had to swallow his tongue. If you want a recent example of what’s been going on, witness Webb at the PPI a week before the budget hoping that the Treasury would abolish the Lifetime allowance.
This is how things are in politics, for a Pension Minister to do the job, he or she needs to be an operator. I am quite sure Osborne and Webb don’t have much time for each other as people, but I’m sure they respect each other as politicians.
There has been nothing getting in the way of the coalition consensus, unlikely as that consensus seemed five yeas ago,
We have had a political consensus because Steve Webb has come up with policies that Osborne could not gun down. The State Pension reforms have been properly costed, there is a mechanism to move back our retirement ages if we continue to live too long and the safety valve is to abandon the triple lock.
The “pensions revolution” is of course the change in the tax treatment of our DC retirement savings. I sense that neither Steve nor Malcolm are convinced they are a good thing. If all we get is what we’ve got, I’d agree.
But we are getting new pensions which will bridge the gap between the unloved annuity and undeliverable mass drawdown. The answer is not cashing out – it is a return to collective pensions. Webb got his Pension Schemes Act, Osborne got his Pension Taxation Act. I doubt we’d have had either with a big-fat pension commission moaning away.
It took a couple of minutes for Osborne to demolish our at retirement system, it will take three years to replace it. But the site has been cleared and foundations dug. The creation of collective schemes which can provide us with target pensions may take three years to legislate for (provided some pension commission doesn’t interfere).
The Pension Herbert is quite wrong to throw pot-follows member and defined ambition to the mercies of a pension commission. These are policies that have been arrived at through the offices of a democratically elected Pension Minister acting in consultation with his department and the pension industry.
Finally, let’s put to bed this argument that there is too much change in pensions. What has happened over the past five years has happened because there has been no fundamental change in DC over the past 25 years. The RDR, auto-enrolment, pension freedoms and the rebuilding of the DC framework through CDC mean that Britain can once again have a pensions system to be proud of.
We may have some more work to do cleaning up LGPS and creating a fairer spread of wealth between public and private sector pensions, but that’s for our next Government. Right now, we should be applauding the change not bemoaning it. A big-fat pension commission would never have allowed the progress we have seen.
I’m sorry that Steve feels he needs a pension commission for him to talk to Government, he should get out more! I have been to the DWP six times this year and the Treasury three times, Benefit Consultants have never had such access to Government.
We are about to elect a new Government, that may be the same as the old Government or may be something new. Whatever it is, and up here in Scotland it looks very different, it will be the Government of the people of the United Kingdom of England, Scotland, Northern Ireland and Wales.
The pension policy we adopt going forward may be shaped by the existing coalition, a Labour party with or without Gregg McClymont, UKIP, the DUP, Plaed Cymru and the SNP(not forgetting the Greens).
For Pensions to declare UDI from all this seems arbitrary and arrogant. We are one nation in retirement and to consign pension policy to a junta of the great and the good from our little world will do nothing to restore people’s confidence.
Ironically, in arguing for a maintenance of the status quo, Steve and Malcolm are calling for fundamental change. Malcolm is even calling for a fundamental review of the tax reliefs surrounding pensions! That’s another problem with pension commissions, everyone secretly wants to play pension minister, collectively they end up like the tigers running round the tree till they turn to melted butter. If you are too young to remember the story of Little Black Sambo, you can read it here (and watch the video at the end of this paper).
Change is part of things, changes in pensions will happen, whether a quango called the pension commission is formed or not. If the next George Osborne decides to throw a hand grenade into the coy-carp pond, there is nothing that a pension commission could do- other than to moan.
The exemplum of good pensions governance has been the system we have had over the past five years which has seen the introduction of the first part of auto-enrolment, the creation of a new and better state pension system, a proper system of governance for personal pensions, a curb on advisory, fund and transactional costs and the foundations of a new way of spending our savings.
All of these policies (and I do exclude pot-follows-member which I don’t get) have taken us forward. The department of pension irresponsibility continues to play silly buggers with the LTA and annoy everyone with its showboating on pension freedoms but that is the price we will have to pay.
So my message to Steve and Malcolm is to stop worrying and continue doing the great job you do for pensions. With the likes of you two, that grumpy Higham character, Ros Altmann, Jo Cumbo and a fair few others, pensions is more than capable of looking after itself.
Above all, let’s make sure that we get another proper pensions minister not some dim-witted apparatchnick who couldn’t get into the Treasury’s first team.