"Give us a break. Stop rocking the boat and making us all sick. Leave pensions alone," says Aries' Ian Neale as he talks about politicians' constant 'adjustments' of the pensions system.
Walking along the concourse at St Pancras this morning I stopped to listen to a talented boogie-woogie pianist, playing one of those pianos which have been thoughtfully provided for anyone to play. I love this kind of music for its effervescent vitality and the exhilarating ride; I admire the technique required, with the left and right hands doing quite different things. But I wish pensions wasn't quite like that.
Over the years several state pension schemes have been built and scrapped, with contracted-out rebates offered, cut and then withdrawn; annual and lifetime allowances expanded and then slashed; automatic enrolment rules tweaked and adjusted time and again – and we've barely got started on that.
Politicians seem unable to keep focused on the horizon, repeatedly returning to adjust the steering according to what is just in front of them – which is a bad idea when you're learning to drive. All this chopping and changing, stopping and starting, cutting and trimming, is damaging, dispiriting and disillusioning.
It's not clever. Ministers might think these constant 'adjustments' are making the system better, but they frequently fail to appreciate the implications for systems when, for example, they introduce new information reporting requirements. They don't recognise the potential for collateral damage when they ban consultancy charging. And when they demand more tax income to plug the deficit, the scope for human behaviour to alter their expectations is always underestimated.
In the real world, as the findings of research into behavioural finance demonstrate – and even the Government is beginning to acknowledge, perceptions count and people frequently do not act rationally. It helps, though, if the rules of the game are agreed and the goalposts not constantly moved. As the success of ISAs shows, if the Government offers a simple proposition and demonstrates long-term commitment, without suddenly deciding it can't be afforded any more, people will follow.
And it can be done: even in pensions, which are inherently anything but simple. The present Government last year accepted the finding of the Kay review of UK equity markets and long-term decision-making, that pensions require a focus on members' long-term investment objectives, with performance reviews based on long-term absolute returns and not more frequent than necessary. This was reflected in the somewhat astonishing commitment to Parliament that there will be no further changes to public sector pensions for 25 years.
So give us a break. Stop rocking the boat and making us all sick. Leave pensions alone and maybe we'll recover our faith in the future.
Written by Ian Neale, director, Aries Pension & Insurance Systems Ltd
ian@ariespensions.co.uk
