So the Prime Minister has officially fired the electoral starting gun. To be honest, it was more peashooter than Magnum.
David Cameron’s first election pledge was an unlikely one – if the Tories win the next election, the PM promises they will keep the “triple lock” formula for rises to the state pension.
Hardly visionary stuff, but it is a neat illustration of politicians’ ambivalent attitude to pensions. Generally speaking, pensions have all the electoral appeal of a smack in the mouth, but the pledge was no idle remark slipped into an interview with a journalist. It was carefully calibrated to generate both headlines and court pensioners.
By giving a firm commitment to state pension provision, the PM is aiming to reassure older voters. Ironically his pledge came just a day before the Chancellor warned that he plans to make £25bn of public spending cuts after the election.
So the political value of such reassurance is clear. And the way it was phrased spoke volumes too. The very idea of a “triple lock” sounds solid, robust, and immune from political meddling.
Sadly the wider pensions system has proved anything but; and successive governments have been unable to resist the temptation to overhaul it on a regular basis.
At best, these constant changes have left consumers and companies confused, and at worst Chancellors have treated the pensions industry as a personal ATM for the Exchequer.
Ever since Gordon Brown’s stealth tax raid on pensions, politicians have tended to view taking money from people’s pension pots as a “victimless crime” - so complicated that most of us neither notice or understand what is going on.
Leaving the dog in charge of the sausages
In my view letting politicians legislate on the pensions industry is like leaving the dog in charge of the sausages. Their desire for short-term electoral or fiscal gain - be it through headline or vote-grabbing giveaways, or by levying stealth taxes - is fundamentally incompatible with an industry that revolves around thinking long-term.
Electoral pledges about the state pension may help politicians’ prospects, but for the wider public they may do more harm than good. There’s a danger that people hearing the PM’s announcement will be lulled into a false sense of security, and may even put on hold their own pension saving. This would make the pensions crisis worse, not better.
All hail the Bank
So what’s the solution to all this political tinkering? Perhaps the best option is to give control of the pensions industry to the Bank of England.
Just as the Bank took over interest rate setting in 1997 to end previous governments’ dubious habit of cutting rates just before an election, so I’d like to see it make long-term decisions on pensions independent of the electoral cycle.
What we lose in democratic accountability would be more than made up for by consistency, continuity and – with luck – a strategic vision that extends beyond the next election.
