A radical idea
Michael Johnson has published his proposal for a workplace ISA, Michael has explained this to me before and has explained his proposals publicly to the DWP Select Committee.
The proposal is not just to include an ISA as something that employers can pay into (new in itself) but as an alternative to the workplace pensions we use today.
Indeed it seems to have replaced (in Michael’s mind) the group personal pension, as a saving option.
Including the Lifetime and Workplace ISAs within the auto-enrolment framework would enable employees to choose where auto-enrolment (AE) contributions would be accumulated. The choice would be between a Lifetime ISA (employee contributions), a Workplace ISA (employer contributions) and the employer’s own occupational pension scheme (all contributions).
If Michael Johnson means to have disenfranchised the personal pension, then this is very radical indeed. It may be that he hasn’t got his head around GPPs or master trusts and is simply using the phrase “employer’s own occupational pension scheme” as a catch all term for workplace pensions.
Well conceived but ill-delivered
The wording is unfortunate as it further alienate those of us who work hard to explain how pensions work to employers and staff.
Michael is dismissive of the current pension set-up and I’m with him on the need for disruptive change to restore confidence in pensions
Today’s workplace savings environment includes some disgruntled employers, a defensive pensions industry and an under-saving population deterred from engaging with an industry that is widely distrusted.
I don’t feel particularly defensive about change in pensions, I support a move from EET to TEE, especially if it enhances the final e where people are sensible in their retirement spending behaviour (Teen) and where the burden for bedding in the changes is put on the scheme or plan administrator and not on payroll.
I am similarly with Michael Johnson on NIC changes and see no reason for the £14bn loss in NICs occasioned by employer contributions.
If all that Michael was trying to do was to change the way that pensions are organised so that they were progressive and not regressive in terms of taxation, I would have no problem with his proposals. I was close to being in total alignment with him in the months prior to the budge.
But he’s playing the hooligan and promoting pension vandalism and th!at is not restoring confidence in pensions!
…now he’s gone and spoilt it all , by saying something stupid like “Workplace ISA”.
I have no more to say on why I think Michael is wrong than has already been said by Richard Graham MP and Baroness Ros Altmann
- ISAs are not pensions
- Workplace ISAs are not workplace pensions
- Auto-enrolment is hard enough for employers without more choice
- Auto-enrolment is hard enough for payroll without another payroll option
- Investment default strategies will be complex to unworkable
- What is that rare beast – a public policy success – will be put in peril by tinker
- Risks diminishing a good idea, the Lifetime ISA
Come back next week!
The time for the workplace ISA has not yet come. It will come when we have completed stage one of auto-enrolment. Just as in Australia, there will be a second phase of pension decision making when individuals will want more personalised investment strategies with greater personal ownership
This happens when people have money in their pots and are acclimatised to saving. For now we have challenges enough getting employers to make sensible and informed choices on their workplace pensions.
I don’t sense that Michael lives in the world of employer decision making, let alone the worlds of payroll , accountants, book-keepers and financial advisers who, for all Michael’s derision, are trying (and succeeding) in making auto-enrolment happen.
Michael is a good man, he works without pay and comes up with great ideas. The workplace ISA is a good idea but we are not ready for it.
ISA ain’t gonna wash, ISA ain’t gonna wash ,
ISA ain’t gonna wash for a week