When Ros Altmann was looking into Government instead of looking out, as she is now as pensions minister, life must have been so much simpler. As advisers we are always being warned about conflicts of interest, yet politicians are seemingly exempt.
Pension freedoms released money into the economy just as the access to Lifetime Isas will encourage money to be spent instead of saved. If we made people pay the money accessed back into the Lifetime Isa and charged them interest on that “loan” the product would, in effect, be the fixed interest part of their savings. That to me is far smarter than what has been proposed.
Meanwhile, the Women Against State Pension Inequality campaign rumbles on. The reality is the changes made in 1995 were not announced in a blaze of publicity. As a result, they did not reach those affected, so the communication – for what it was – failed miserably.
And this is not the first time this has happened. When women were given the option of paying less National Insurance back in the late 1960s it resulted in them being tied to their husband’s state pension age instead of theirs. However, a lack of communication made many unaware of the drawbacks of this lower-cost option. Part of the reason for the Waspi revolt is that there remains confusion. A lot of people see the state pension as a form of savings, whereas it is in fact a benefit and subject to change.
But perhaps one positive to come out of the whole sorry affair is more people are becoming engaged in the need to plan for retirement. There is clearly now an acceptance by the younger generation that they may need to work in some way past the age of 65. What would concern me is if that generation were to rely on the state pension as income from a specific date, when it is more than likely they will see their state pension age continue to slip into the horizon.
It is ironic that we seem to be heading backwards and not forwards with regards to state benefits, with automatic enrolment not even remotely contributing to a gap that is getting bigger all the time. It is clear auto-enrolment will need to push up contributions and the fact they are still to be age-related remains a puzzle to me. When you are forcing people to save you need to be very careful the level of contributions you set is going to deliver something of substance.
I cannot really see us getting out of this spiral unless pensions are taken out of the Government’s control. When governments are in place for five years and the problem we are dealing with is over a far longer period, there is a clear conflict that needs to be addressed.
I would like to think Altmann will educate the Treasury in the need to encourage long-term savings where access comes with strings. That way we will not be facing a nation with no option other than to work until they drop.
Robert Reid is director of The Ideas Lab