Pensions report: 50 shades of grey

Demographic change is a spur to action
March 4, 2020

We’re approaching the start of the first full tax year of the 2020s, a decade in which pensions loom larger than ever—in terms of both the public finances and raw politics. For it is during the next 10 years that the ageing of the great demographic bulge of baby boomers will really make itself felt; by 2030, they will overwhelmingly be of pensionable age, at least as it used to be defined, and the oldest part of the cohort will be heavily reliant on state and private pensions, as care costs rear their head and building society accounts run dry.

Such thoughts are a useful spur to all of us to step up our planning for retirement. Paul Wallace and Andy Davis give sage advice about the broad outlook for pension investments, as well as the pitfalls and the continuing advantages created by the tax regime. The most frequent complaint, as Davis argues, is baffling complexity. But sadly, simplification is no simple business for public policymakers. Why? Because if pensioners are more numerous than ever, they are also more diverse. Half a century ago, “elderly” and “poor” were nearly synonyms. It is terrific news that there is no longer a cast-iron link between being old and being poor. But it does mean different social groups have very different needs.

This is a field where the parties have achieved a rare degree of consensus of late, but Labour’s Margaret Greenwood is especially keen to highlight the plight of those workers who look like falling between the gaps in the auto-enrolment scheme. Meanwhile, David Cameron’s former pensions minister, Ros Altmann, worries about those who are covered but end up shortchanged by miscommunication, maladministration or hidden charges. Politicians pay heed. Bespoke and careful policy must be devised for the very different needs of these groups. Otherwise, the fast-growing grey vote will soon have its revenge at the ballot box.