#labourmanifesto – the pensions chapter

 

I guess it was all predictable (the bits that hadn’t already been leaked). But, there was a distinct air of retrospection about the chapter on pensions in Labour’s 2017 manifesto.

 

Here are the key headlines:

  • Triple lock guarantee
  • EU citizens pensions guaranteed
  • Compensation for women who’s pension age has been increased
  • Legislation to protect accrued rights
  • No increase in the state pensions age
  • The restoration of confidence in workplace pensions
  • The end of rip off hidden fees and charges
  • Large efficient pension funds to keep costs low for employers and employees
  • Hints about generic tax reliefs being revisited

 

Hmmm. Which bits of this were a surprise? Not much.

The contents of this manifesto chapter was to be expected and those who monitor pensions policy around parliament could see the power of lobbying writing the script before it was printed.

But there are some key things I’d expect to see and don’t  – at about:

  • Improving savings levels?  – shouldn’t a Labour Party be increasing contributions
  • Access and engagement  – what about a nice big fat state intervention to make sure all pensions funds are collected in one place to assist understanding going forward?

Pensions/life time savings debate  – Labour is silent on all this which is potentially changing the whole face of saving in the UK – default drawdown products?

 

OK, so here are some thoughts on the things that are in there:

 

Triple lock guarantee.

 

This is an interesting one. It’s a Lib Dem policy brought in under a coalition government. Some would say it was Steve Webb’s biggest achievement after the state pension guarantee. But the well documented expense of the triple lock has eroded the credibility of the policy by Ros Altman amongst others and most know how much it is hated by the Treasury, so its survival is questionable.

 

EU Citizens’ pensions guarantee

 

The vocal minorities have lobbied the redtops hard on this issue as one of the downsides of Brexit. It’s a little surprising that this makes it into the Labour Manifesto given the voting habits of the people it effects. I’d guess there’s little more of a snowball’s chance in Torremollios than any of the beneficiaries of this policy voting Labour. But there you go  – the power of the tabloid interests.

 

Compensation for WASPI women

 

This was a must for Labour. Given that the Tory minister has gone on record saying that there will be no movement and that there has been incredibly consistent lobbying from angry women, they couldn’t avoid offering something to the women who’ve missed out to state pension age increases. There will be a little blue water here which could support a couple of votes here and there for those women already pre-disposed to voting for them.

 

Legislation to protect accrued rights

This is a surprisingly technical point for a manifesto and not massively voter facing.

‘Accrued Benefits’ include all the benefits earned by an employee on a pension plan, based on years of service with an employer. Accrued benefits may include vacation, sick or personal time off, or other related benefits. Employees who are laid off, retire or are fired must receive all unpaid accrued benefits. A 2014 Court ruling said that when a pension scheme is changing the rights for an employee (eg changing from DB to a DC scheme) and where there was no guidance benefits should be calculated based on the date the member’s pensionable service ends, not earnings at the date of amendment. This is presumable what Labour are trying to enforce in legislation.

 

No increase in state pension age

 

State Pension Age increases are possibly the most important points for Labour’s traditional vote.  As many on the left are quite right to point out, extending state pension age is much more impactful for those who are carrying out physical work than those at a desk. It’s a hard one to square because the cost of and aging population is eye watering for the Treasury and at the same time the people least likely to live a long time are those doing manual work and therefore most in need of an early retirement (and to date more likely to be in Labour’s heartland). Indeed as Steve Webb points out the cost of just cancelling the state pension increases alone is £300 billion! As The Turner Commission said and most policy observers will say, we can’t possibly avoid increasing pension age over time.

 

The restoration of confidence in workplace pensions

 

This is an odd one. Most observers would say that since auto-enrolment with its famously low opt out rates confidence in workplace pensions is already high and on the rise. So what can they be referring to? Perhaps introducing further simplicity  – for example getting rid of band of earnings and qualifying criteria? Perhaps increasing pension contributions over time. Though this is inevitable it would bring them into (more) conflict with the business community. Who knows  – there is no detail. Perhaps it general code for further reform in workplace pensions  – like the points below?

 

The end of rip off hidden fees and charges

 

This is a core Labour issue. Gina Miller’s True and Fair campaign which has been lobbying hard on this issue has driven significant awareness in this area.

There is no doubt that there have been hidden charges and it is well documented that these charges have driven trust levels in the financial services industry down as far even as politicians. At the same time, instinctively the Corbynistas hate the sorts of fat cats who have creamed off too much profit which should have been put back in the pockets of the working people who have been saving in the products. As an aside then, there is something of an irony that some of the worst offenders are the DB schemes set up and defended by Labour run local authorities.

 

 

Large efficient pension funds to keep costs low for employers and employees

 

Keeping costs low for consumers should be Labour’s heartland and the creation/flourishing of very large funds which can run at low cost because of the scale they bring is key to delivering good member outcomes. The mastertrusts have been on the move on this point, bringing about some of the lowest charges to members that have ever been seen in the market. Every political party loves good value for consumers and what’s not to like if there’s no cost to the exchequer. The nutty issue here will be the role of NEST going forward.  While Corynistas would probably be happy to pump NEST with more state funding to ensure their intervention into the decumulation market (as well as the accumulation market). There will be those on both sides of the debate who would consider that their job is done and the market is mature enough to drive low cost solutions for consumers without NEST. The question for many here is when does a minimum market intervention become and intervention too far?  No guessing where this Labour party will be on the issue.