Given the risks articulated by the Labour Party around the Freedom and Choice pension reforms for consumers, why didn’t the Opposition oppose more vigorously the freedom and choice agenda?

Article 1 based on a speech for TISA Edinburgh, 14/1/16

I think it’s fair to say that the pensions reforms announced in the budget 2014 were the best kept policy change secret since the independence of the Bank of England.

The reforms were not over communicated in advance.

Why? Well this was not a policy which had not been kicking around too long. You could tell that because there was so little detail coming out of the Treasury at the time immediately following the budget announcement. Civil servants were frantically trying to pull together a sense of how on earth they were going to make it happen. There was a feverish sense around Whitehall that they had to make this sound credible, but couldn’t actually tell us how the policy was going to work.

The pensions reforms were a fairly undeveloped fledgling policy at the time of announcement. One might argue that this was key to the secrecy. Very few people knew, because very few people had worked on it.

Those in the know were:

  • A handful of hench men around the Chancellor
  • The Minister for Pensions who knew for a week and was terrified about a DWP leak before the budget – as it could only have been traced to him.
  • The Opposition who knew on the morning of the announcement – so they have very little time to prepare.

I guess we could have predicted something to happen around pensions  – maybe a reduction of tax relief which had been trailed,   but none of us dared to imagine that as the PM lined up the ​ “patronising Labour vs freedom loving Conservative party” dividing line, it was going to hit public policy in pensions in this way.


So the whole thing came as a shock to pretty much every stakeholder in the pensions arena. There were and remain lovers and haters to the policy.  The FCA hurriedly set up a workshop at which shocked stakeholders exchanged top line views on how it should all work. And of course Her Majesty’s Opposition, consumer organisations, politicians on both sides of the house and various other commentators have been pointing out the dangers. It’s fair to say we could anticipate that some public policy changes may follow.

So what are the Consumer risks that were disturbing the Labour Party?  I think we can break them down into three main categories:

  • The Lambourgini risk articulated by the Minister at the time – people drawing down their whole pension, blowing it on a car and then having nothing to live off. Its hyperbolic discounting risk on speed – the lack of ability to delay gratification, coupled with an inability to plan for old age and calculate how long non working age will be.  The Minister at the time was well aware of this risk, described it in some detail and then justified getting behind the policy by saying ‘hey we’re liberals so we want people to do what they want’ .  Never mind that this particular policy of giving people ‘freedom do what they want with their pensions money from 55’ was at odds with his flagship policy on automatic enrolment.


  • Extortionist rip off risk – Vulnerability to exposure to unscrupulous offers from poorly priced products or extortionists wanting to sell you a car parking space in Mallorca, or something similar. There was and remains huge disquiet about the levels of mis-selling risk and the government has yet to say how it can help with this. It’s pretty non intuitive to introduce a freedom and then regulate it massively to try and protect the consumer.


  • Finally there’s the consumer detriment risk. The risk that they pay too much for advice. The risk that they pay too much for access and draw down and the risk that they will pay too much tax because they took too much out too soon.

Put simply the risk in aggregate as the Labour Party see it, is that people will run into pensioner poverty because they have spent their money too fast.

This then becomes a political risk because those people with little private savings will then lean on the state  –  and in a population where the demographics are getting ever older. This doesn’t look good.

So why on earth didn’t HM Opposition oppose it at the time?

Well, the timing here is crucial. It was politically impossible to oppose in the run up to a GE. Who’s going to be calling out to stop the squeezed middle from ‘having freedom to make their own choices’.  No-one wants to be accused of being a nanny state, no-one can say ‘people aren’t well enough informed to make their own decisions about what do with their own money’ and remain popular.

BUT that’s the reality that was spelled out in Turner  – illiberal though it was, Turner and his fellow commissioners knew that they had to remove choice from savers while giving them the illusion that they still had choice to get them saving for retirement.

The Labour Party were in a quandary with very little time to decide what to do.

In summary it was decided that a full frontal opposition would a) fail, b) be unpopular and that c) the right technical solution in any event would fall out  – and that would be a regulated default income drawdown product.

It feels like we may well have some changes to come to this policy. As we look to the future, I will be tracking the politics around these areas for potential policy change in this area to see what might be coming down the line.  See article 2.