In this week’s Money Marketing, former Conservative Shadow pensions minister Nigel Waterson makes an eye-catching comparison between the Government’s RPI to CPI move and Gordon Brown’s infamous raid on pensions in 1997.
Waterson, who shadowed the pension brief for the Tories from 2005 until the general election when he lost his seat, says the move was not discussed in opposition and suggests it was driven through by the Treasury as a cost-cutting measure.
The Government line is that CPI is a more appropriate and fairer measure of inflation.
But many suspect the move has more to do with the £85.9bn the Department for Work and Pensions estimates will be saved through the switch rather than a desire to create a fairer system.
The policy did not appear in the LibDem manifesto and Waterson’s revelation that it was not discussed as part of the Conservative party’s pension strategy only adds to these suspicions.
Although Brown’s removal of advance corporation tax relief on dividends for pension schemes raised many concerns from the pensions industry when it was introduced, it was years before the impact of the changes hit home with the wider electorate.
The infamous policy was intrinsically linked to Gordon Brown and for many people it became the ultimate symbol of Labour’s pension failures.
The economic climate is vastly different now and there is a certain acceptance among the electorate of the need to make significant cuts to the public purse.
But voter anger over the RPI-CPI move may well come back to haunt the current administration in the future when the effects hit home.
Waterson is also right to question the frenetic speed at which new pension policies are being introduced.
Many of the coalition’s pension proposals are a vast improvement on Labour’s seeming desire to make things as complicated as possible. But in its eagerness to make its mark, the Government must be wary of the potential negative effects of this haste.
It is feared the flexible and capped drawdown regime, applicable from April, has been introduced too quickly.
Providers will be rushing to market with new offerings in the next few months. Let us hope that too many corners have not been cut to satisfy the Government’s need for speed.