View more on these topics

Gregg McClymont: Don’t blame politicians for constant pension reform


Stability in policymaking is a pre-requisite of a successful long-term savings system. Individuals can hardly be expected to make long-term plans if the rules keep changing, while providers cannot be expected to invest in new technology and systems if the regulatory framework is unstable (the sale of Axa Wealth being the latest example).

Yet the legislative merry-go-round continues. At the beginning of this year, there were no fewer than 10 ongoing Government consultations impinging on defined contribution pensions alone.

So, why the endless churn? The usual culprit is politicians – or, more accurately, politics and the way it now interacts with the insatiable demands of 24-hour news networks and social media. Woe betide the politician who, in response to a news story, says the cure is worse than the disease. Something – anything – must be done. The “losers” from any policy decision have instant access to a millions strong echo chamber, whether that be Facebook, Twitter et al, and subsequently the 24-hour news networks for whom social media now sets so much of the agenda.

Campaigns can be organised and amplified overnight at little cost. Under this relentless pressure politicians’ “long-term” decisions soon collapse into short-term fixes: the infamous u-turn.

But beyond the exigencies of politicians there is a more fundamental reason why, in long-term savings, the only constant is change. Globally, three macro trends are interacting to destabilise pensions provision across the UK and the developed world: demographic change, fiscal pressures and the demands of individual citizens to have more control over the deployment of their assets.

I recently examined the pensions systems of seven nations – the UK, Australia, Canada, Germany, Holland, Sweden and Poland. Each is confronted by demographic changes and increasing fiscal pressures (the two are related).

Across the world, the number of people aged over 60 is projected to rise from one in 10 to one in five by 2050. By this date, there will be more over-60s than under-24s. The ageing process is particularly acute in developed nations (although China’s demographic challenge is significant too – a long-term effect, partly, of its one-child policy), where declining fertility rates, inexorably rising longevity and popular opposition to immigration interact to push dependency ratios higher. The result, in pay-as-you-go systems that feature as part of most nations’ pensions mix, is fewer workers to pay the pensions of more retirees.

Demography is not destiny. Demographers are increasingly alert to the capacity of policymakers to influence future trends: for example, Germany’s acceptance of around one million Syrian refugees promises a dramatic improvement in the nation’s (rapidly deteriorating) dependency ratio over time. But the fiscal pressures exerted by demographic change are real.

Add to this the dynamics of competition (which encourage developed world economies to redirect public spending towards investment in innovation and upskilling, demand support for entrepreneurialism often via lower taxes and taxpayer funded support, and exert downward pressure on corporate tax revenues as they seek to attract multinationals) and the global trend away from state and employer organised collective provision is explicable.

The placing of a greater responsibility on the individual to provide for their own retirement is the consequence. A phenomenon, in turn, reinforced by cultural change in terms of the growing demand of individuals for greater autonomy over their own lives, as the rising tide of individualisation (and distrust of institutions) sweeps across the developed world.

The UK has, of course, taken steps to reduce the cost of its retirement system. The new state pension is not more generous in total, as the last government repeatedly implied. In fact, the cost of the state pensions comes down in the long term as additional state pension payments are first indexed less generously, before working their way out of the system completely. It is why the Treasury agreed to the policy. There are more losers than winners. To similar effect, the Chancellor has accelerated planned increases in state pension age – an acceleration which, he boasted, had saved the Government more money with less protest than any other policy (at least before the Waspi campaigners). But in the teeth of the global headwinds outlined above, one wonders whether it will be enough.

So the next time our politicians reform the pensions system, spare a thought:  they are likely at the mercy of demographic and fiscal pressures common the developed world over.

Gregg McClymont is head of retirement savings at Aberdeen Asset Management



PM warns of Brexit threat to pension triple lock

David Cameron says the Government cannot guarantee protections for the state pension in the event of a Brexit. Speaking on the Andrew Marr show this weekend, the Prime Minister said a vote to leave the EU could cause a “black hole” in the public finances, the BBC reports. He warned the triple lock on state […]

Stockmarket FTSE 480

Rival exchange launches to challenge FTSE ‘monopoly’

Bats Europe is launching a UK-focused benchmark to challenge the FTSE group of indices. The stock exchange operator has launched the Bats UK 100 to challenge what it says is a “monopolised” market, reports CityAM. The launch is supported by Alliance Trust Savings, AJ Bell, Charles Stanley Direct, Hargreaves Lansdown and Rathbones. The index is part of […]


LV= calls for compulsory guidance to tackle ‘mis-buying crisis’

The Government should force savers reaching retirement to take guidance if they do not have a financial adviser, LV= says. In its response to the Treasury’s consultation on public financial guidance, the mutual says low take up advice is creating a “mis-buying crisis”. In the March Budget the Government revealed it is to create two […]


News and expert analysis straight to your inbox

Sign up


There are 11 comments at the moment, we would love to hear your opinion too.

  1. Gregg, your missing one fairly major point. Most people actually want politicians of principle who don’t swing in the wind, so actually yes the politicians are most, if not all of the problem. They have known about the demographics issue and refused to address it when it needed to be addressed, instead putting it off and off, till it became a much more serious problem than it needed to be.

    Secondly, they are directly responsible for most of the reasons why the developed world is in the mess it’s in, because they swing in the wind and feel the need to constantly meddle in things they simply don’t understand.

    None of the issues cannot be resolved, the only reason any of them haven;t been is because of the politicians, so please stop making excuses for them….

  2. Pension are a political tool. Politicians have continually used them to gain votes. What we are left with is a self destructing system that is doomed. They have promised so much and have no way to pay it, unless they tax the following generations out of existence. Do not be fooled that they want to close our boards, they need the influx of people to pay for their past promises.

    The latest employer 3% contribution to AUTO Enrolment is only the start! This is in fact the politicians making the private sector pay for the politicians promises, whilst still providing gold plated final salary pensions to those in the public sector. The public sector continue to strike if it is reduced or they have to work longer shouting “fair pensions for all”. It is a shame they are so poorly educated and don’t understand the facts, put that down to very clever politicians.

    The biggest threat to pensions are the public sector final salary pensions, which are building up trillions of pounds of future debt. Yet you will not see any politician suggest like the public sector that they are stopped, I wonder why?

  3. What a load of………..! Politicians, have choices, make choices and usually nothing to do with helping members of public. Just for the power and the glory and as we all know, power corrupts and absolute power, corrupts absolutely

  4. What a load of bull. Of course it is politicians. The limits on pensions is purely political – an attempt to offer a placebo to the less well off. Who says that the great British public want more control? Far too many of them are disinterested and around half don’t know what 50% means.

    You may well have looked at other countries, but omitted to mention that the UK pays the lowest State Pension in the whole of the OECD. (As measured by the percentage of average earnings).

    All these crocodile tears about saving and retirement ignores the fact that we are the most indebted country in the world – bar none and perhaps it might be more prudent firstly to see how debt can be reduced.

    The providers ands the fund management industry are willing Government stooges as they hope it will increase their inflows.

  5. Politicians are supposed to set the agenda and create policy, not just respond to the news agenda and seek popularity. Mr. McClymont appears to be blaming others rather than admitting that politicians seek popularity above all else. We elect politicians to lead rather than to follow. Where have all the statesmen and stateswomen gone? If the author believes that it’s not possible to resist these pressures, perhaps it’s just as well that he never got the opportunity to be in charge.

  6. Watch House of Cards – pretty much sums it up

  7. What a complete tool!

  8. Julian Stevens 15th June 2016 at 9:52 am

    Even if we accept that the ceaseless imposition of changes to the pensions system is driven by “demographic and fiscal pressures common the world over”, I really wonder if what amounts to a programme of increasingly brutal pruning and complication of said system is doing more harm than good, certainly to public confidence. The combination of an annual input limit and a now frozen LTA ~ both non-indexed ~ renders retirement saving progressively less attractive. The scope for tax incentivised saving is being restricted at both ends of the equation, with perhaps the only ray of sunshine being the increased ISA input allowance.

  9. Changing the lifetime allowance had nothing to do with life expectancy and demographics. Removing dividend tax relief had nothing to do with life expectancy and demographics. Pension freedoms had nothing to do with life expectancy and demographics. Preventing DB schemes from fixing the roof while the sun was shining had nothing to do with life expectancy and demographics. The threatened move to TEE will have nothing to do with life expectancy and demographics.

    Moreover, everyone knows that life expectancy will increase, so when one lot of politicians rips up the rulebook written by the last lot it is nonsense to say it is because of demographic changes. The last lot already knew about that.

    The increase in the State Pension age is the only thing that had anything to do with changing demographics. The constant changes to the rules on private pensions are stealth taxation, raiding the larder while everyone’s back is turned.

  10. Pauline Forbes 16th June 2016 at 5:11 pm

    It seems to me that the real culprit here is the rise of Enabling Legislation, something that is worrying the legal profession, MP’s and the House of Lords amongst others. From the Financial Services and Markets Act 2000 which is most relevant here, through to legislation like the Legislative & Regulatory Reform Act 2006 (nick named the ‘Abolition of Parliament Bill’ when it was initially introduced!), an increasing number of Acts applying to various areas of life now establish and enable executive bodies which have the power to shape legislation through Delegated (or Secondary) legislation such as Statutory Instruments and Regulations that can often fly under the radar of media and public scrutiny until they are in place and equally have not previously received the detailed consideration that normally applies to Bills on the way through both Houses. The House of Lords has recognised this and is in the process of establishing committees to scrutinise Secondary Legislation.

    The result of all this this is the ‘constant’ change referred to in the article title, and the increasing requirement for things to be reversed or ‘undone’ after public or other objection… Where previously legislation was considered, reflective and of long duration, today it might better be described as evolving, reactive, complex and even somewhat transient….. Tracking SI’s since 2008/9 and the changes to (and length of) the FCA handbook give some insights into the power executive organisations can have to make changes that might not be deeply scrutinised or widely understood, and the frequency with which they can take place!

    The Hansard Society was concerned about this general trend in legislation overall as far back as 2013 when it undertook research into whether excessive use was being made of executive discretion and power and if so how it might be restrained.

    The treatment of savings, investments and Financial Services perhaps provides one example of the effects of this legislative change where we see constant tinkering by successive governments through their executive arms for whatever reason – political expediency, economic necessity, demographic change – leading to increased complexity and ‘politicisation’ of areas such as pensions.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm