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Labour grandee calls for cross-party talks on savings reform

Labour grandee Lord Des Browne is calling for cross-party action on long-term savings as he slams the Government for “ignoring” the broken annuity market.

Browne, who was a Labour MP from 1997 to 2010, has been leading the charge for the opposition on the Pensions Bill in the House of Lords.

The peer’s vast political experience includes serving on the cabinets of two prime ministers and holding ministerial responsibility for immigration, defence, the Treasury and Scotland.

Browne was drafted in to be part of the Labour frontbench on the Pensions Bill. Labour was focused on reforming pot follows member, boosting charges transparency and helping people make better decisions at retirement. 

To that end, Labour tabled an amendment – which had been rejected in the Commons – to force prospective annuitants to consult with an annuity broker. The Government again rejected the proposals claiming it could lead to “misselling” unless there are minimum standards on brokers.

But Browne says: “The Government has ignored this problem for too long and there are daunting and horrifying figures about the degree of variation. It can only be explained by those who are selling taking advantage of people’s lack of knowledge. The annuity market is broken.

“I want the Government to engage with this issue. The decisions people are making are the wrong decisions in significant numbers.”

Browne says referring to an annuity broker is a short-term measure but the annuity market needs structural reform.

Browne believes the major parties must come together to boost long-term savings via a review or other vehicle.

He says: “Auto-enrolment and the single tier state pension is a good basis but people are still not saving enough. We are willing to work across party lines, we have made that position very clear and supported a lot of these reforms.”

In an interview with Money Marketing last month, Treasury select committee chairman Andrew Tyrie called for a cross-party commission on long-term savings.

At party conference last year shadow Labour pensions minister Gregg McClymont told attendees to “watch this space” for Labour proposals on pensions tax relief.

On charges, Labour had more success as the Government caved to its demands for full transparency of pension costs and charges when former Tory Chancellor Lord Nigel Lawson joined the cause.

The Government has amended the Bill to allow the Government to force transparency of all auto-enrolment pension fund charges.

Browne says: “This is the right framework but the regulations that follow are crucial. We must have full disclosure of all costs and as a Government we will make it a reality if they do not.”

Browne believes the Government has been pushed around by the industry on transparency issues and the delay to implementation of a pensions charge cap. 

He singles out the Association of British Insurers as wielding huge power with secret Government talks during the Bill.

He says: “My sense was there was a conversation going  on between the Treasury, DWP and industry – especially the ABI – that was not being fully reported back to parliament.

“There was a constant narrative that the industry was getting its act together, things are improving and the information you have is dated.”

Browne’s concerns echo those of McClymont who has accused the industry of  “walking slowly backwards” away from action.

Browne says: “This is the right framework but the regulations that follow are crucial. We must have full disclosure of all costs and as a Government we will make it a reality if they don’t.”

Browne believes the Government has been pushed around by the industry on transparency issues and the delay to implementation of a pensions charge cap. He singles out the Association of British Insurers as wielding huge power with secret Government talks during the Bill.

He says: “My sense was there was a conversation going on between Treasury, DWP and industry – especially the ABI – that was not being fully reported back to parliament.

“There was a constant narrative that the industry was getting its act together, things are improving and the information you have is dated.”

Browne’s concerns echo those of McClymont who has accused the industry of “walking slowly backwards” away from action.

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  1. goodness gracious 17th March 2014 at 10:57 am

    Des Browne, who had ministerial responsibility for immigration, defence, the Treasury and Scotland is a fine one to call for more savings. Under his and his parties leadership immigration shot up to the extent that loads of British youngsters cannot get work, the arm forces were starved of equipment but the Ministry staff numbers expanded, the Treasury ignored the banks misbehaviour and Scotland is so disillusioned with Westminster politics that a load of them want to break away. Hardly a good CV!
    But now he is calling for a reversal in the trend of reliance on borrowing and place emphasis on saving. The very trend that accelerated massively under the two PMs he worked with, but not, note, via a call to his own party to fix this once elected, but he is calling on all parties, so he can blame someone else when it doesn’t happen quickly enough.
    So how do you promote long term savings to the less wealthy? An endowment perhaps, oops, I forgot, they are now effectively banned from the market. I know, regular payment into investment ISA, but without advice that costs more than one years £50.00 p.m. contributions, so no advice due to RDR (formulated by his past Government creating the advice gap. Self select without advice will end in tears for many following ‘market corrections’, so this is a non starter. Savings in Banks/Building Societies, what do you think?
    Perhaps what is needed is a NEST type government sponsored investment scheme that de-risks according to the chosen term. Perhaps it could be called the Personal Investment into Stockmarket Savings via Official Funds. (sorry, no acronym yet).

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