Save today, to live tomorrow. The basic idea with pensions could hardly be simpler, and yet the British way of providing for old age leaves everyone baffled. No one who isn’t paid to grapple with it really understands the state system; the mish-mash of earned and means-tested entitlements is the product of rules that have been almost continually rewritten over the decades. On the private side, countless employer schemes co-exist with millions of individual pension pots, most of them very small.
Some see strength in diversity, and—to be fair—the last couple of decades have seen a surge in pensioner incomes, and a decline in poverty such that, for the first time in history, the elderly are no longer any more likely to be in hardship than anyone else. Nonetheless, there is a price to be paid for all the confusion. For one thing, it has provided cover for outright skulduggery and even fraud: think of the mis-selling scandal and the infamous raids Robert Maxwell and other robber barons since made on staff pensions. As Frank Field reports, a crackdown on rogue bosses is at long last being proposed; there can be no excuse for delay.
But beyond outright malfeasance, the complexity also gives rise to a law of unintended consequences. Take the Pension Protection Fund, which is—as Field intimates—often all that stands behind luckless workers and ruin. Having been involved in setting it up as a young man, I fully support it. But there is no doubt that the insurance premiums it charges on surviving final salary-type schemes are another burden on them, hastening their demise. Even seemingly obvious improvements can go awry in unforeseen ways. Guy Opperman writes about the “dashboard,” an online portal which will—supposedly—allow everyone to see all their entitlements in one place. It is a marvellous idea, but as Andy Davis cautions, the challenges are formidable. Disparate databases will have to talk to each other, and the scheme could yet be hijacked by disreputable sellers who encourage people to entrust their life savings to high-charging schemes.
Governments of both stripes have talked about choice. But in this baffling landscape, perhaps we should not be so surprised that, as the minister writes, the single policy that has made the most demonstrable difference involves the opposite—auto-enrolment. It works by allowing us to sleepwalk in the direction of a secure retirement.