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I have a dream

Scottish Life head of pensions strategy Steve Bee sets out his vision of a cross-party body to implement long-term pension reform in the UK.

I have spent a fair bit of time over the last few weeks going through the many responses to the Pensions Commission report and I am as confused as ever.

While I am reading them, I find myself thinking they make a load of sense. But having read a few different ones,I realise they actually do not.

Most of them, to me at least, deal with just one or two of the problems confronting our pension system in the UK. I have not read any response which made me think it contained the answer to everything.

It is all a bit like working on one side of a Rubik’s Cube while mucking up all the work that has previously gone into getting the other sides sorted out. It is not holistic.

I know it is easy to say but, to me, the whole thing looks pretty simple. Just allow me a minute or two to explain what it looks like from where I stand.

In the UK, we have done a really good job of saving for our futures in what is a mainly voluntary pension environment. The fact is we have put aside about 1,300bn in funded pension arrangements. That is pretty good, particularly as there has never been a law in the UK under which employers have been required to set up pension schemes for their employees, nor has there been a requirement for people to pay into their own pensions.

Nevertheless, in this purely voluntary system, we have managed to put aside 1,300bn – more than all the other 24 countries in Europe have managed to accumulate between them in funded pension savings.

The strange thing is that our voluntary system is said to be in the last-chance saloon. Why? I think our voluntary system works really well. We do not need to scrap it in favour of some kind of compulsory nanny-state approach – we just need to make sure it works for everyone.

The system we have today works really well for about half the workforce but completely fails the other half, who are almost certainly heading for a future tainted by the ignominy of relying on means-tested handouts from the state. That is the crisis which is upon us.

When the Turner report refers to the so-called pension gap of 57bn, all it is really saying is that if we want the have-nots to have 1,300bn worth of pension assets just as the haves have, then putting aside billions of pounds a year for long enough will do the trick. It is not hard to work out.

But we will need some truly visionary approach to make the breakthrough required. We need statesmen, not just politicians, to get us through this. You do not need to be much of a student of UK pension history to understand that pension policy is a political football. If we had all day, I could give you countless examples of why. But how do you get party politics out of pensions? How do you get pension policy decided by people with a longer time horizon than four or five years?One way would be for an independent body, such as the Pensions Commission, to be set up to oversee the implementation of genuine long-term pension policy – something we would be obliged to stick with. Many people have been saying this would be a good role for the commission and I almost agree but not quite.

For good or ill, pension policy is so caught up with the political process in our country that I think we would never be able to separate the two completely. A cross-party body to oversee pension reform would be a good start. We have the right people in Parliament to sort things out but they are not all in the same political party.

Perhaps we could start by getting David Willetts from the Conservatives, Frank Field from Labour and Professor Steve Webb from the Liberal Democrats to join forces with Adair Turner and his other commissioners to establish a cross-party group to set the course for the 21st Century pension journey. Add to that someone like Dr Ros Altmann, who really cares about the way this pension stuff affects real people, along with the intellectual rigour of Alison O’Connell of the Pensions Policy Institute, and I would say we would have a pretty good shot at spreading voluntarism in our country.

That might not be the pension dream team everyone would come up with but it would get my vote. We might also be able to show the way forward to the underpensioned countries in Europe.


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