Back in the 1980s, when I was embarking on a lifetime of sweat, toil and tears in order to bring home the bacon, I lived in a pensions desert. I couldn’t see, feel or feed one (a pension, that is) for miles around.
During this decade, against a backdrop of privatisations, a rampant Prime Minister (Margaret Thatcher), Michael Jackson’s Thriller and Madonna’s virgins, I was privileged to work for four employers. A major chartered accountancy practice, a big and little publisher and a now defunct building society. Not one offered me the opportunity to save into a company pension.
At the time I wasn’t bothered – life was for living, a house (well, ok, a flat to be precise) had to be bought and the starting of a family was very much at the forefront of our minds (our being myself and wife Susan). I needed every penny my employers reluctantly paid me.
But as time has passed and my ginger locks have turned grey, it has increasingly irked me that I was not encouraged to start building a pension pot early on in life. How much better positioned I would now be to face my eventual drift into semi-retirement and obscurity, walking the Lakeland fells and left to wander lonely as a cloud.
Of course, today, my four early employers would not get away with sitting me in a pension desert because of the new auto-enrolment rules introduced in late 2012. They would be required to put a plan in place, provided my pay matched the minimum under the auto-enrolment guidelines (debatable).
Sadly, auto-enrolment is about the only good thing that has happened to private pensions in my working lifetime. With the honourable exception of the setting up of the Pension Protection Fund in 2005 to protect employees’ pensions in the event of their employer going bust, everything else has been for the worse. Pensions have become a political play toy. Ministers of all shades and persuasions have done their bit to undermine the pensions savings habit with a raft of restrictions and taxation changes.
The result is a pensions framework that creaks badly at the seams. A complicated system has been created that discourages rather than encourages people to save more. It is not fit for purpose.
Defined benefit pension schemes, once the bedrock of private pensions in this country, have been undermined by a toxic mix of crude government intervention (remember Gordon Brown’s £10 billion a year tax raid that began in 1997?), parsimonious employers beholden to shareholders, and in recent years a weak regulator not possessing the proverbial balls to get the likes of Sir Philip Green to fill deep holes in the pension schemes they were responsible for.
Reductions in the amount that can be saved inside a pension (the so-called lifetime allowance) have been introduced without rhyme or reason. Restrictions in the amount that high earners can save in a pension have been applied in ways that even leave actuaries with fearsome headaches. More and more rules (most of them ridiculous) have been heaped on those who manage or look after our pensions, helping to ramp up costs.
We no longer have a pensions system, just a pensions mess that the Treasury seems to enjoying spreading.
Indeed, current political hostility towards pensions is such that they do not even get a mention in the latest infographic produced by Treasury mandarins on ‘ways to save in 2017’. Lots of mentions of different types of ISA, indeed enough versions to fill ZSL London Zoo (cash, junior, help to buy, lifetime and stocks and shares). But not one mention of the word pension. Take a look for yourself and weep into your skinny latte.
No wonder Baroness Altmann, former Minister of State at the Department for Work and Pensions, believes that short-sighted Treasury policy thinking could ‘destroy’ pensions, ‘leaving huge problems for younger people and future governments’.
In the summer of 2015, the then Chancellor of the Exchequer George Osborne launched a consultation into the future of pensions and the way people are incentivised to save into them.
Most commentators thought the work would trigger an overhaul of pension tax relief and a welcome simplification of the pensions system but none was forthcoming. Osborne lost his nerve, fearing an electoral backlash from those who enjoyed higher rate relief on their pension contributions and who would probably lose as a result of any tax relief reform.
Instead, the consultation was side-lined and further messy tinkering applied to the pension tax relief rules. Unacceptable.
Of course, there are big issues facing this country, none more so than the march towards the door marked Brexit, the parlous state of the National Health Service and the mounting social care crisis.
But at some stage, the Government has to come clean on pensions. Does it see them as a cost to be controlled (very much the Treasury’s view), a savings vehicle that should be superseded by ISAs (kinder on the Treasury’s pocket) or the way forward?
We need answers sooner rather than later. So that we can save for the future with confidence, until the day that we are deemed surplus to requirement and left to wander lonely as a cloud with (hopefully) a fattish pension in our back pocket.
Jeff Prestridge is Personal Finance Editor of The Mail on Sunday
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