Workplace pensions are the great post-war economic success story providing stability and security for millions into their extended retirement whilst supplying the fuel to drive investment and the City. You would think it would be economic and political madness to do anything to strategically unpick and undermine this success. Indeed, as post-war boomers increasingly give way for a generation whose parents do not remember the pre-war insecurities, you would think governments would be as eager to educate them in the post-war successes as they are to tell them of the military battles that forged victory.
And yet, if George Osborne’s economic strategy includes pensions at all it is negatively adding confusion and, by design or by accident, making it harder to sell or sustain the vital importance of workplace pensions to new employees between 18 and 40, known as Generation X and Generation Y. This potentially spells disaster for all of us. It is time to wake up and smell the coffee and start talking, understanding and arguing pensions.
“Left wing union hysteria?” I hear you ask. Well let us look at things dispassionately. Since Osborne became Chancellor six years ago he has overseen a concerted attack on public sector pensions that continues. Currently seeking to cap final salary pensions; making it harder to access early retirement; encouraging huge expansion of public sector apprenticeships with no expectation that apprentices enrol in their public sector scheme, and introducing regulation to reduce savings by applying a minus inflation charge. That is without considering his breach of contract for all women contributing to the state pension still in work who had been planning to retire at 60, but who now either have to get less or work longer – a penalty also linked to higher national insurance contributions from April.
Then there is his broader economic strategy, if someone about to publish their fourth budget in 12 months can be said to credibly still have a strategy. Pensions involve saving for a rainy day. Every aspect of Osborne’s policies reward those who have saved but make it harder to save for those still in work. Student debt and a repayment model that taxes graduates at around 8% of future earnings; a housing policy that makes mortgages or renting more expensive to reward investors; a public sector pay ice age that reduces the capacity to save; cutting department and local authority budgets which accelerates outsourcing which reduces employer contributions to pensions and increases uncertainty about pension rewards; it is difficult to sell saving for a rainy day when its pouring down now!
His rushed and ill thought through pre-election gimmick of freeing up people’s ability to cash in pension annuities may have been good short-term politics, lending itself to warm words like “choice” but the way it was done tacitly undermined pensions just as more were being auto-enrolled. The suggested cut to tax incentives for pension savings, rumoured by ex-pension minister Steve Webb would remove a major structural incentive to saving in a pension.
This is without focussing on Osborne’s promotion of flexible working championing low pay, job insecurity, more costs transferred to the employee (remember free car parking at work?) and low regulation to make it easier to hire and fire. Anyone see an incentive to put away the umbrella and save for tomorrow?
CIPD research shows 66% of workers are now in a workplace pension but that leaves 34% without any post retirement saving plan and the outcome for the 66% looks less certain and stable than ever. In January, a struggling NHS Trust suggested asking staff to opt-out of their expensive scheme in return for more pay now. Unions need to monitor the opt-out rates closely.
The greatest threat to democracy is public cynicism and it may be unnecessarily cynical to say Osborne’s undermining of pensions is a deliberate act to feather the nests of his corporate City mates selling insurance – many of them are as worried as Napo by his assault on future investment funds. His legacy to future pensioners does not look healthy. They may ask: “How did they get away with that?” Well his greatest ally was ignorance. People did not understand or value what they had access to. He did not hit today’s pensioners because they would have destroyed him. He could take away something many did not know the value of or understand.
Napo’s fightback has started. We are making sure members not only know what is going on but our new pensions guide ensures members can understand how their pension works; and our new members benefit package will include access to independent financial and pensions advice so members can make the most informed decision they can. We are also exploring and suggesting alternatives that we will be promoting and debating in our new online strategy forum.
Assistant General Secretary