The case for a pensions commission
Time to entrench cross-party working on this long-term issue
Boris Johnson has a convincing electoral mandate. He can govern as he pleases without accounting for the views of his opponents—and on many issues he will do just that. But there are some questions where the new Conservative government should work on a cross-party basis even though it does not need to.
We believe that pensions policy is one of these. We lead two think tanks, on the left and right of politics, and following a joint programme of research we have reached the firm conclusion that, in this area, decisions should not be dominated by partisan politics and instead politicians should come together.
There is a very clear reason for this. The decisions politicians make about pensions are long-term. They sometimes take decades to implement and their consequences can last a whole lifetime as people pay in to and then draw from their pots. A direction of travel therefore needs to endure for more than one electoral cycle. Although the outcome of the latest general election has transformed politics, we passionately believe that a cross-party approach to policymaking is likely to lead to difficult but desirable reforms in the long term.
In our joint research on pensions policy, supported by The People’s Pension, we have established that much more unites than divides politicians from the different parties, as well as the interest groups which normally face off against each other. For example, everyone we spoke to believed that workers should save more for retirement automatically, unless they opt out, so that the power of inertia can deliver all of us a decent pension.
In Framing the Future we call for the government to establish a new Pensions Commission to entrench and institutionalise a consensus-based approach. Our research found very broad support for establishing this commission. Both the pensions minister Guy Opperman and the shadow pensions minister Jack Dromey are strong supporters. And early in a parliament is the right time to act: there is sufficient backing to launch a pensions commission in 2020.
Our plan is for this to be initially modelled on the Turner Commission on pensions that met between 2003 and 2005. It was a time-limited review which set a fresh course for pensions policy by developing a new evidence base and building understanding. It was the most successful example of long-term, consensus-based policymaking to be seen in recent times.
There are three reasons why a similar time-limited review should run from 2020 to 2022. First, the reforms proposed by the Turner Commission have just been fully implemented. The state pension age for women and men will reach 66 in 2020 and the introduction of automatic enrolment workplace pensions was completed last year, when minimum contributions reached 8 per cent of qualifying earnings.
Second, the agreed, long-term approach the last commission established has started to unravel. This started with George Osborne’s “pension freedoms,” which liberalised how people can use their pension pot from the age of 55. Then December’s general election further eroded consensus, with the Labour Party announcing it opposed future rises in the state pension age and offering compensation to women born in the 1950s.
Third, there are pressing strategic choices facing ministers where outside advice is needed. In particular, serious thinking is needed to set the long-term direction for private pension saving, establishing how to increase contribution levels for our new system of opt-out workplace pensions and extending coverage to under-pensioned groups such as carers and the self-employed. A commission also needs to suggest pathways at the point of retirement that offer people flexibility and choice but also ensure they are able to share risks and secure a guaranteed pension for life.
But many of the politicians and experts we spoke to did not just want a one-off review of pensions. They also proposed a permanent institution to gather first-class evidence and scrutinise everything that happens in this domain. They envisaged a body along the lines of the Office for Budget Responsibility that would become the authoritative home for data and modelling on retirement finances, in order to examine trends, risks and scenarios and to scrutinise the impacts of emerging policy.
In our report we therefore propose that the one-off pensions commission should work up plans for its own permanent successor. This new statutory body would become the home for the analytical capabilities developed by a time-limited review. It would be tasked with carrying out thematic inquiries of pension issues in the future, including hosting the periodic assessments of the state pension age which are already enshrined in law.
As a new decade starts, there is no better time to think about how to create the institutions and conditions for good long-term policymaking. And no issue requires a consistent, long-term approach more than pensions. Broad cross-party agreement is both necessary and there to be grasped. A new pensions commission can turn the shared yearning for consensus that exists today into something more concrete. It can be the catalyst for a detailed new pensions settlement rooted in evidence, debate and broad-based agreement.
Ryan Shorthouse is the chief executive of Bright Blue. Andrew Harrop is the general secretary of the Fabian Society. Framing the Future: A new pensions commission is available at fabians.org.uk and brightblue.org.uk
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