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If I had a tenner every time I heard someone call for the politics to be taken out of pensions then I’d be close to hitting the tax relief limits on my pension plan.
Last week former minister Lord John Hutton called for a permanent independent pension commission to set long-term policy. Advisers call for political stability every day. Providers, still licking their wounds after last year’s bombshell Budget announcement on pension freedoms, think of little else but an end to “tinkering”.
With tomorrow’s Budget the industry is pleading with the Treasury not to do anything that will rip a hole in their business models.
And you can see what they mean. Whether it is last year’s shock freedoms, the new plan for a second hand annuity market or tinkering with tax relief change is the only constant.
But, so the argument goes, a pension is a long-term saving plan that needs certainty and steady rules so big changes for short-term political expediency are potentially ruinous.
The anti-politics brigade want some kind of elite panel of experts to make plans beyond parliaments more befitting the long-term nature of pensions.
This is ridiculous. Elections are meant to change things. They are the expressed will of the British public and if they vote for a party or politician that wants to tinker with pensions all day long then that is their democratic right.
It is also the democratic right of representative elected politicians to continually reflect the will of the population even when there are no imminent elections in Budgets, autumn statements etc.
There would be little legitimacy for a permanent panel of so-called experts – most likely drawn from a self-interested industry where most of the pension expertise and lobbying money resides.
Nobody can deny that the 2005 cross-party Pensions Commission led by Lord Adair Turner broke a logjam in pension saving but it only succeeded because its results were backed by elected politicians.
Long-term thinking will only happen when the politicians demands it with their democratic legitimacy. Pensions is too important to be left to dry technocrats with no elected accountability.
What people really mean when they call for the politics to be taken out of pensions is that they don’t like the policy.
Look at annuity specialists Just Retirement and Partnership, bruised by last year’s Budget on freedoms but welcoming this year’s annuity plans.
Or Legal & General insisting on a 0.5% pension charge cap but warning over drawdown demands from savers.
Or Hargreaves Lansdown insisting on no changes to pension tax relief but happy to propose radical changes to auto-enrolment contributions.
When George Osborne tinkered with inheritance tax by abolishing the 55% charge on pension pots passed on to beneficiaries, advisers were delighted. Great tinkering!
But last week when Ed Miliband said he wanted to cut pension tax relief lifetime allowance from £1.25m to £1m and the annual allowance form £40,000 to £30,000, advisers complained. Bad tinkering!
Cap on drawdown charges? Bad tinkering. Cuts to inheritance tax? Good tinkering.
This shows the conundrum of those who call for politics to be taking out of pensions. What they really want is for those in power to do more of the policies they agree with and less of the policies they don’t agree with.
We need to stop the fetish for being “non-political” because one person’s short-term political expediency is another person’s dream policy change. That’s politics and the more of it we have in pensions, the better.