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Take the politics out of pensions with dream team

Whether you think it is an actual crisis or a perceived one, there is no doubt that Britain is in the grip of a crisis of confidence in pensions that has the potential to be crippling if it is not tackled head-on.

Now is not the time to pussyfoot around, now is the time for radical action to be taken.

The action taken must be sensibly and for the long term, transcending short-term political point-scoring.

Up until now, pensions have been treated very much as a political football, which is why I support CBI chairman Digby Jones’ recent call for “a sensible cross-party consensus” on how to change Britain from being a nation of spenders to a nation of savers.

For good or ill, pension policy is so caught up with our political process I think we will never be able to separate the two completely but what we can do is move the debate away from party politics.

To this end, Mr Jones’ suggestion of a cross-party body to oversee pension reform mirrors my own sentiment.

I believe we have the right people in Parliament to sort things out but when it comes to the crunch, party politics and short-termism shunt actual, long-term change into the long grass.

So how do you strip party politics out of pensions? How do you get pension policy decided by people with a longer time horizon than four or five years?

If we are to tackle the pension crisis effectively we will need some truly visionary approaches and a long-term view.

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 that we would be obliged to stick with.

I have mentioned before that my personal dream team for this purpose would be David Willetts from the Conservatives, Frank Field from Labour and Professor Steve Webb from the Liberal Democrats and to get them 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.

Ideally, I would like to see someone like Dr Ros Altmann added to the mix. Ms Altmann genuinely cares about the way this all affects real people and is not afraid to make her voice heard while Alison O’Connell of the Pensions Policy Institute would add a touch of intellectual rigour to the group.

This list is by no means exhaustive but it is a damned good start. With this dream team as a foundation, I think that we would have a pretty good shot at spreading voluntarism in the UK. This is particularly pressing as, undoubtedly, with Adair Turner’s Pension Commission reporting later in the year, the big pension issue that will come up soon after the general election will be pension compulsion.

Laying the foundations for developing a viable long-term approach to encourage voluntarism is in everyone’s best interests.

Surely, if we are to encourage the estimated 12 million UK workers who have no pension savings to change their ways, the dream team would have to ensure that ultimately every pound saved will make the saver at least one pound better off. There may not be much movement from means-tested benefits in the short to medium term but such a disincentive to saving cannot be ignored for much longer.

As an interim measure, Scottish Life has previously put forward the concept of a money-back guarantee which could be introduced quickly and easily as part of the imminent pension legislative changes. This would allow individuals to unwind pension plans at retirement if the pension proved to be unsuitable because of the impact of means-tested benefits. Perhaps this could be point two on the agenda of the dream team’s inaugural session? Well, I can live in hope.

Steve Bee is head of pensions strategy at Scottish Life


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