Rory Murphy: The case for a permanent pensions commission

Setting up an ongoing vehicle for reviewing the retirement savings landscape

clock • 4 min read
Rory Murphy: If we knew about the problems that were looming in the late 1990s, why has so little been done?
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Rory Murphy: If we knew about the problems that were looming in the late 1990s, why has so little been done?

The chair of trustees at the Merchant Navy Officers Pension Fund explains why, some 20-plus years after the idea was first mooted, a permanent, independent pensions commission is still needed.

"An organisation, independent of government, needs to have lead responsibility for accumulating, analysing and publishing information about current and future pension provision and its implications for pensions policy."

I don't imagine many in the pensions sector would argue with the logic and appeal of this recommendation.

What might raise eyebrows is the fact that this conclusion was published in a report, compiled by the Pension Provision Group (PPG), set up by the recently elected Labour government way back in June 1998. It made sense then, and it makes sense now. But 26 years on, it still hasn't happened.

In fact, many of the issues identified by the PPG, and the wider Pensions Review, to which its findings contributed, have not only persisted over the intervening quarter century but, in some cases, worsened. The Pensions Review of the late 1990s sought to address ten challenges, including "to strike the right balance between the generations" and "to tackle the growth in pensioner inequality".

However well intentioned, subsequent pensions policy has all too evidently failed to tick either of those particular boxes. A briefing on the widening wealth gap between generations, published last September by the International Longevity Centre, revealed "a startling decline in the share of wealth held by those under 40".

The Blair government did, of course, go on to appoint an independent pensions commission under Adair Turner, and to introduce legislation on its key finding in the form of auto-enrolment, which was subsequently implemented under the coalition government – a mere 15 years after the PPG was set up.

But what emerges from even a cursory read through the PPG's 26-year-old report – We All Need Pensions: The Prospects for Pension Provision – is a sense that so many of the challenges and issues it identifies remain today.

If we knew about the problems that were looming in the late 1990s, why has so little been done – at least in terms of public policy? Probably because ministers across the political spectrum have always been highly resistant to the idea of relinquishing any responsibility for policy to anyone else - regardless of their qualifications or expertise.

In one sense, that reluctance is understandable. Politicians are elected to devise and implement policies in the interests of their constituents. To hand that job over to the industry they have been elected to oversee could be seen as undemocratic - especially in an area like pensions, where billions of pounds of taxpayers' money is at stake.

But in the early noughties, numerous voices, including the National Association of Pension Funds (now the Pensions and Lifetime Savings Association), Trades Union Congress, Age Concern and the Turner Commission itself, urged the creation of a permanent, independent pensions commission.

Such a body, made up of representatives of the pensions industry, employers, members, academia and the voluntary sector, would provide an ongoing assessment of the strengths and weaknesses of the pensions system. It would not have policy making powers, thereby addressing the concerns of those worried about democratic accountability. It would, however, report regularly to the government and where necessary make policy recommendations addressing the issues it has identified, and ministers would have to publish their response.

You probably wouldn't be surprised if I said that one of the other stated aims of the Pensions Review was to "review the current state of the pensions and retirement savings landscape… [and] to evaluate whether the current framework will deliver sustainable retirement incomes for individuals".

But that phrase doesn't appear in the Pensions Review. It's actually taken from Labour's Plan for Financial Services, published in January this year.

I have no quarrel with that idea. But if an organisation along the lines proposed over twenty years ago had been set up at the time, such a review would be unnecessary. We would have had an ongoing vehicle for reviewing the retirement savings landscape throughout the last two decades, and effective, well-thought-out policy could have been implemented on the back of it.

The philosopher George Santayana famously observed that "those who cannot remember the past are condemned to repeat it". He probably didn't have the UK pensions system in mind, but whoever holds responsibility for pensions policy in the coming years would do well to heed his warning.

Rory Murphy is chair of trustees at the MNOPF

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