t’s inevitable coalition government policy will be a Frankenstein monster – ideas from different parties are stitched together to form a whole. And then politicians cross their fingers and hope it will be cohesive enough to lumber through to the next election without collapsing into a pile of disparate body parts.
Up until recently, it appeared that the coalition had pulled this off with its pensions policy. The introduction of auto-enrolment had both cross party and industry support and, more importantly, it would make a positive difference for millions of voters.
But in the space of the last few months, the stitches holding Frankenstein’s body together are starting to fray and pull apart.
The announcement at the budget to abolish the requirement to buy an annuity at retirement represented a U-turn in government attitudes towards pensioners – now we can be trusted to spend our pension pot wisely rather than being frog-marched into a guaranteed retirement income.
However, it was last week’s announcement that the government want to introduce a collective defined contribution scheme when the stitches start to seriously unravel. As I outlined, in last week’s blog, this is an unnecessary step, which only introduces yet more complexity into an already convoluted realm.
What is so perplexing about the current direction of government pension policy is that there are still some glaringly obvious issues that need addressing. One such issue is the lack of adequate pension provision for the UK’s growing number of self-employed workers, which now number 4.5 million, equivalent to nearly 15% of all employment.
In recent article written for Professional Pensions, I outlined how pension provision in this significant minority is woefully inadequate and there are no obvious solutions to this problem – it’s impossible to auto-enroll a population that has no employer. And targeting such a disparate population has significant challenges.
This is not the only area of policy that needs some serious attention. Even though auto-enrolment should be applauded as it will ensure an additional 8 to 10 million workers have an occupational pension, it still seems a 19th century solution to a 21st century problem. It assumes we still live an environment where a job is for life.
Yet it’s the proportion of the population in this privileged position is dwindling. Assuming my friends and colleagues are fairly representative section of the population, those with long-held positions are in a minority – most change jobs every two to three years. That’s an awful lot of pension pots to accumulate over a lifetime. A more coherent government policy that allows scheme members to have just one pension pot they pay into, no matter where they work, would make a real difference.
With less than a year until the next election, the government has little incentive to unveil any major new policy changes. We can only hope that behind closed doors the policy wonks are pondering the important problems like ensuring the self-employed have adequate pension provision and solving the pension pot problem.
On the plus side, these issues do seem to be gaining some traction among the more mainstream media. But it will take more than a few articles to make real change. We need a cohesive pension policy which addresses the retirement needs of all voters. That won’t be achieved by cobbling together different policy ideas.