Towards the end of last month, the government launched a new pensions commission. The last one, which reported nearly 20 years ago, carried out one of the most effective and impactful of all independent reviews done for governments. It led directly to automatic enrolment into pensions, consensus on the need to increase pension ages and increases in the level of the state pension. <\/p>\n
It is not surprising that this new body is badged as a \u201crevival\u201d of the original commission. Its remit is to look at ways of raising income levels for future generations of pensioners, particularly those at risk of poverty and with low lifetime incomes, while taking account of the sustainability of the system. Excellent. While, on the surface, things seem to be going pretty well, there are some serious challenges coming down the road.<\/p>\n
We know broadly what needs to be done in terms of increasing pension saving, raising pension ages and stabilising the level of the state pension. The key challenge for this new commission will be to translate sensible proposals into a broad consensus. More perhaps than any other element of government activity, pension policy needs to be stable and long-term.<\/p>\n
One of the last commission\u2019s great achievements was to win a fight with the Treasury that the state pension should rise henceforth in line with average earnings. Recall that for 30 years after 1980 it rose only with prices, falling further and further behind earnings. It was at risk of becoming nugatory. Since then, the political consensus has shifted 180 degrees. The so-called triple lock \u2014 which sees the
pension rise each year by the higher of earnings growth, price inflation and 2.5 per cent \u2014 appears sacrosanct.<\/p>\n
But nothing lasts for ever. Indeed, many people don\u2019t think the state pension<\/a> itself will last much longer. When polled, a third claim not to believe it will exist in 30 years\u2019 time. This despite the way that politicians of all flavours fall over themselves to guarantee not merely the pension, but also the continuation of the triple lock. I wonder if the widespread scepticism is in fact a reaction against those promises. People are not completely stupid. The triple lock clearly can\u2019t go on for ever. So if our elected representatives aren\u2019t being honest about that, who knows what their real intentions are?<\/p>\n This lack of confidence is a real problem. Even for the pretty well heeled, the state pension is a crucial part of retirement planning. It provides possibly the only guaranteed regular income that most will receive in retirement, it is a bulwark against the fear that savings will be means-tested away and it provides some protection against inflation.<\/p>\n