Ian Neale placates the unease towards a new pensions minister
Apprehension that Steve Webb's successor as Pensions Minister might be less well-informed evaporated this week with the appointment of Dr Ros Altmann, who is to be ennobled. Any reservations about an unelected Minister are trumped by her technical competence.
Her background as an economist and investment expert has not made her a back-room technocrat though. She has a reputation as a crusader for older people and consumer interests. Journalists have always found her more than accessible - she is no shrinking violet.
Dr Altmann is no stranger to Government either, having spent four years at Tony Blair's Number 10 Policy Unit, and before that contributed to the Treasury-sponsored Myners Review.
So she is aware of how Government works, and in particular she won't be naive about the relationship between her department and the Treasury. Perhaps the key question is what difference can she make?
As curator of the tar pit that is pensions legislation, she might help to develop new safe routes but the industry is already pleading for a freeze on further complification. An independent pensions policy commission is high on our wish list; I have advocated it should have a wider remit, to encompass long-term savings and care, and a title of Later Life Commission.
This is one of several initiatives I personally favour for which Dr Altmann has also voiced support. More needs to be done to facilitate investment in infrastructure. Another is 'Save More Tomorrow' schemes (although these really only work in an economy where employees actually receive annual pay rises). Important too is the image of pensions: over a decade ago I pointed out the brand appeal of a 'super fund', the Australian equivalent.
However, politicians can be easily led astray by ideas which are superficially appealing but not sensible. A recent example, one of Steve Webb's kites seized upon by the Treasury when they realised the short-term potential tax take, is the proposal for re-selling annuities.
In my last blog I gave some of the reasons why the industry should ensure this is buried quickly.
Worryingly, Dr Altmann believes this is an idea worth pursuing. Welcome though her appointment is, for the industry this illustrates a risk that she will court immediate popularity at the expense of further latent damage to the industry.
Politics is the art of the possible. We all know that the Treasury dominates pensions policy, having control of the levers of tax relief. It might be crying for the moon to ask for this to be handed over to an Independent Commission. But we cannot go on as we are, with salami-slicing the Lifetime Allowance every other year (for example).
Cogent arguments exist for taking this out of the Treasury's hands because it is inimical to encouragement of long-term saving via a pension plan. In opposition, the Conservatives bitterly opposed Gordon Brown's attack on ACT relief, but in office they have themselves been unable to resist the temptation to slash pensions tax relief.
If we have to accept that an Annual Allowance (AA) of GBP 255,000 and a Lifetime Allowance (LTA) of GBP 1.8 million (the 2010/11 limits) are absurdly generous and somehow unaffordable, we might pause and look at the subject logically.
Basically, the AA is a limit on contributions and the LTA is a limit on benefits, so there is a case for retaining the AA only for money purchase pensions and the LTA only for defined benefit pensions. Dr Altmann might agree.
Just an idea; but worth considering, especially since exposure of the grossly unfavourable way the LTA applies to money purchase pensions (the GBP 1m limit from 2016 equates to a DB pension of GBP 50,000 but will only buy a comparable annuity of about GBP 26,000).
Welcome to the tar pit, Dr Altmann!
Ian Neale, Director, Aries Pension & Insurance Systems Ltd
