NAPF call for pension commission wins support, practical barriers remain

Political manifestos released last week heralded the importance of delivering good value for savers, however any longer-term plan for pensions was notably absent from the agendas of all three main parties.

Both Labour and the Conservatives revealed plans to cut tax relief on the pension contributions of higher earners in order to fund other policies in their manifestos.

This followed the announcement by the coalition government last month of a reduction in the lifetime allowance to £1m.

In a statement released on Tuesday Joanne Segars, chief executive at the NAPF, called for a long-term plan for pensions and urged the next government to establish an independent retirement savings commission.

“Pensions are for the long term but naturally governments often legislate for the short term, to secure the next electoral cycle. Automatic enrolment broke this mould, but it was born of the Pensions Commission 10 years ago,” said Segars.

“We believe it’s time to return to the source of that success… to secure savers’ long-term interests not politicians’ short-term concerns,” she said.

The NAPF’s call for an independent commission builds on recommendations from the Work and Pensions Committee in its report published last month.

But David Robbins, senior consultant at Towers Watson, said the implementation of the the Pensions Commission reforms, led by Lord Turner, was slow and the creation of another commission would present significant practical difficulties.

“The issue with a commission is it slows everything down… it’s easily five years until anything actually happens,” said Robbins.

The trouble with pensions is that they’re so political, so intrinsically linked with taxation policy and affordability

Catherine McKenna, Squire Patton Boggs

Catherine McKenna, global head of pensions at law firm Squire Patton Boggs, echoed these concerns and said delivering an independent commission would be a “quantum leap” for the industry.

“An independent commission looking at long-term pension planning would be an ideal solution but there is a big gap between making that happen and where we are,” said McKenna.

“The trouble with pensions is that they’re so political, so intrinsically linked with taxation policy and affordability,” she said.

Long-term horizons

However Ben Franklin, senior research fellow at the UK’s International Longevity Centre, backed the idea and said the industry needed a clearer set of policies to safeguard the retirement income of future generations.

“There’s been so much change over the past five years, consumers are really facing the perfect storm. There is no real income growth, low investment return and a continual rise in life expectancy,” said Franklin.

He added: “Taking it out of the hands of politicians, at least initially, is a good idea so we can have a holistic view of pensions policy.”

Franklin said the previous commission generated cross-party support and consensus between employers, the industry and academics on the policy of auto-enrolment.

Jane Vass, head of public policy at charity Age UK, said pensions policy needs to deliver over the next 30 years.

“There is debate over the exact form a review should take, but it needs to be independent, and it needs to look at retirement savings and income in the round,” said Vass.

What politicians' tax relief pledges mean for savers

Higher-earners will likely face changes to tax-relief after the general election, regardless of who is in power.

Alan Higham, retirement director at Fidelity Worldwide Investment, analysed how proposals from Labour, the Conservatives and Liberal Democrats would impact in monetary terms on the taxation of pension contributions.

Higher earners will experience the biggest cuts to tax relief, although the proposed flat tax rate proposed by the Liberal Democrats has an impact lower down the salary scale.