Our politicians should help us simplify the system

At the turn of the century, I made a speech in Monte Carlo urging the government to tell the electorate that by 2030 the state pension age would be increased to 70 and the basic pension would be £10,000 per annum. The media were not impressed. The Daily Express said its readers would not mind staying at work until 70 if that meant making speeches in Monte Carlo. Hopefully, I might still be around in 2030 to witness the implementation of the policy that I espoused.

I fervently believe that the best guarantee against absolute poverty in old age is a taxpayer financed simple pension. Politicians, acting on behalf of those taxpayers who foot the bill, should have the freedom to redefine what is meant by ‘absolute' and ‘old' even if this means cutting back expectations for some cohorts.

Sensibly, politicians do revisit the balance between taxpayers who pay and taxpayers who benefit within the welfare state. If only they could be similarly flexible when it comes to workplace pension savings. 

The current focus on environmental, social and governance is an acknowledgement that citizens - taxpayers or not - ultimately pay for everything. Taxpayers pick up the tab for political largesse and corporate excess. I would never claim that many occupational pension scheme members benefit from largesse or excess. However, they must acknowledge that their entitlement is being underwritten by today's taxpayers, many of whom are on course for a lower pension than that to which earlier cohorts feel entitled.

Much of today's workplace pension complexity was not the result of collective or individual bargaining. Populist political prescription has not only increased the quantum of benefits on offer, it has contributed considerably to the complexity of that offering. 

Whenever we talk about pension simplification, particularly if it involves a rough and ready approach that might create marginal winners and losers, the spectre of human rights is often raised. Nothing is wrong with this so long as we weigh even-handedly the rights of those taxpayers who benefit and those fellow taxpayers who finance that benefit.

As we reach this point in the evolution of our defined benefit (DB) journey, we must revisit the need for that complexity which increases cost but does not add much value. Indeed, the pursuit of a ‘no lose' outcome increases that proportion of the nation's pensions pot which is spent on running costs to the detriment of the proportion that can be paid to beneficiaries.

It might be argued that Freedom and Choice torpedoed prescription. As the two Michaels - Caine and Johnson - so eloquently said, "George Osborne did far more than blow off the bloody doors".  We are now all working hard to prevent the demolition job that his intervention could have caused.  Paradoxically, we are ending up with more prescription to protect folk from the possible consequences. 

I am passionate about saving. There should be a hierarchy - bank account, ISA and pension.  Whether the latter is DB, defined contribution (DC) or collective DC, the aim should be to provide an income stream to supplement later life wages or replace those wages once paid work has come to an end. Our politicians should play their part in helping us simplify the system in order to increase the cost-effectiveness of this simple proposition. I for one would be happy to face up to those who might lose a few pennies if this meant that taxpayers as a whole got a better deal since there would be massive savings on running costs. Politicians, please help us to be as even-handed in the workplace sector as you strive to be in respect of public provision.

Alan Pickering is chairman of BESTrustees and author of the Pickering Report

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• Alan Pickering