Reviving the argument for an independent pension commission

Unfortunately, this initiative seems to have been left on the back-burner despite healthy support from the pensions industry.

We have already seen the results of political short-sightedness when regard for industry opinion and realistic timeframes are sacrificed in the quest for votes. 

The chancellor’s 2014 Budget announcement was such a surprise, and introduced so quickly, that it begs the question as to whether it was a political move rather than one designed to offer a solution to individuals’ changing financial requirements.

Certainly no one outside of No. 11 saw the extent of those changes coming because no one from the pensions industry had been invited to comment.

In many ways the political interference imposed upon the UK’s pension system is no different to that endured by the National Health Service.

The voices of those who understand the nuances and practicalities of their craft are rarely listened to by policymakers to any meaningful degree.

Green paper

The government is now seeking industry opinion on a potential reform of the UK’s current pensions tax system, with the chancellor stating that he has an open mind on this matter.

But those organisations responding to the consultation may not reflect a true cross-section of those who could add to the debate.

And once the comments on the green paper have been received they will be digested by the same civil servants who drafted it.

There needs to be a robust and forthright challenge, offering detailed consideration of the ubiquitous unintended consequences of changing the tax treatment of pensions.

There is a danger that the current consultation is no more than a standard tick-box exercise that results in an outcome the government desires.

Back in 2004 the Turner Commission introduced the concept of auto-enrolment, which was the result of proposal, consideration, debate and refinement.

Auto-enrolment is not without its faults, but we are on the right path to improving levels of individual prosperity in retirement for future generations and lessening the financial burden upon the state.

An independent pension committee would follow this success.

There would be no point-scoring or casting of votes in secret or, at worse, in a vacuum.

The committee would be able to consider each situation and propose a well-thought-through solution, enabling politicians to introduce measures that meet members’ requirements and aspirations, while providing sufficient financial stability for the Treasury.

It may be that an independent commission will not have any real teeth but it just might influence government policy, shaving off those square edges and delivering a more comfortable, if not perfect, fit.

Long-term stability

We are talking about the formation of a body that would provide the government of the day with sage advice built upon professional consensus; its remit will not include the formulation of policy.

Pensions deserve to be more than a short-term political vote-winner.

The UK population deserves to have a pensions system that is built upon a bedrock of long-term stability and simplicity.

This cannot happen if policy is formulated and imposed by politicians elected to power by the votes of less than 40 per cent of the electorate and who are working to a five-year plan.

Pensions are, by their very nature, long term and we need to ensure that any changes or improvements made are also here for the long term.

Having a truly independent pensions committee will help us to accomplish just that.

David Deidun is a partner at Quantum Advisory