BLOG: Round and round….

Written by Laura Blows

Here we go again. It’s been, ooo, not quite 12 months since we’ve exercised our democratic right to vote, so off we go to the polling booths in June. Do you remember when voting was something that occurred every four to five years? Nope, me neither – just a hazy recollection.

Sorry if I seem a bit weary about the upcoming general election. I blame my ‘youth’. While no longer (sadly) in that apparently politically disengaged 18-24 age bracket, I’m also not sufficiently old enough for politicians to bother trying to entice with their policy promises.

No, it’s the ‘grey vote’ (who tend to vote in large numbers) that the political parties are trying to lure. This means that, again, pensions are being used as a lovely carrot to guide pensioners to the voting stations.

For this election, the battleground is the state pension triple lock. It only came into existence seven years ago but already its future is in the balance.

While the Labour Party has pledged to retain the triple lock until 2025, the Conservative Party has been accused of having intentions to scrap it. Even Steve Webb, who was Pensions Minister when the triple lock came into force, is now saying that it should only be retained for those on the old state pension, with people on the new state pension instead tied to an earnings indexation.

I shouldn’t be surprised. Going back and forth on ideas is not uncommon within the pensions sector, even though it creates a disjointed journey for the saver. A prime example of this is the completely different approaches taken to the accumulation and decumulation stages of retirement saving.

It’s acknowledged that people are disengaged and therefore need a nudge through auto-enrolment to build up a pensions pot – and whether they should be further pushed to increase contributions at regular intervals is currently being debated.

However, once they reach retirement, the complete opposite occurs. Despite some offerings of guidance or advice, people are now trusted to be interested enough in long-term retirement planning (and not just have their head spun at the – hopefully – large pot of money available) to make their own financial decisions.

But hang on; is the pendulum about to swing the other way again? The freedom and choice reforms removed the effective requirement for people to purchase an annuity at age 75. Two years on, discussions are starting to emerge about the need for some form of guaranteed minimum income at retirement.

It is understandable that ‘freedom’ and ‘compulsion’ are both jostling to be the dominant approach to retirement saving. Both have their pluses and minuses; there is not one perfect model. This means that one technique can be adopted, its flaws spotted, so the other approach implemented, the new method’s problems found, so back to the first approach, and round and round we go.

However, evolution does occur within this winding, circular path. Compare the nature of pensions saving 30 years ago with today’s model and it’s clear that long-lasting change has occurred; progress is being made. Some even say it is happening too quickly, with the pace of reform in recent years placing a strain on the sector.

I disagree.

An important word not heard often enough when change occurs is ‘improvement’. Instead the buzzword is usually ‘reform’ – which can of course be good or bad. We see reform after reform of pension policy changes, but not necessarily improvement after improvement.

So to stop going round in circles, tough decisions need to be made by the powers that be as to what actual improvements are needed for the long-term viability of retirement saving, and then adopted in a coherent, joined-up manner.

Otherwise, the navel gazing will continue, the same discussions will repeat, reforms to pensions saving will keep going back and forth, and we will yet again see pension policies being used as enticements during general elections. Which, while useful for politicians, is often less beneficial for savers.

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