It is not usually feasible to put the great and good of the financial services industry together in a room and get them to agree on anything. Typically, they squabble like alley cats, arguing about everything on and off the agenda, even the state of the weather. Occasionally, blows are traded.
Yet a few days ago, I witnessed something of a financial miracle taking place in a swanky restaurant (1 Lombard Street) in the heart of the City of London. Fourteen individuals, representing different areas of the pensions industry, actually agreeing on a pensions agenda that the next government should follow.
I was taken aback as I chewed furiously away on my vegetarian sausages while swallowing gallons of black coffee. Miracles, not misselling, in the City of London? Whatever next? Jeremy Corbyn as Prime Minister? Lord help us.
The meeting was fronted by pensions expert Tom McPhail of Hargreaves Lansdown. What he doesn’t know about pensions can be written on the back of a postage stamp. It was chaired by Tony Langham, chief executive of financial public relations company Lansons.
Between them, McPhail and Langham had managed to badger various pension beasts to come to the dining table. Present were a veritable bunch – representatives from the regulator (the Pension Protection Fund), lobby groups (Pensions Policy Institute and the International Longevity Centre UK), insurers (Just Group) and various trade bodies (the Tax Incentivised Savings Association and the Pensions and Lifetime Savings Association). There was even a consumer advocate present (Doug Taylor, ex Which?) and a member of the fourth estate (yours truly).
McPhail came armed with his ‘manifesto’ for savers and investors which he passionately believes the next government should follow (you can see it here).
A manifesto which is eminently sensible, including proposals to fix tax relief on pension contributions, extend pension auto-enrolment and preserve the £5,000 tax-free dividend allowance.
Yet it was the subsequent debate which proved empowering. To a man and woman, we all agreed that it is about time pensions were depoliticised.
Why? Because over the years, political tinkering has turned pensions into a quagmire. Every government – Labour, Conservative and Coalition – has sought to cut back on the cost of incentivising pension saving. The result is a series of reductions in the lifetime savings allowance, cutbacks in the annual amount that can be saved into a pension, and turning pensions into no-go areas for additional rate taxpayers.
It is the equivalent of political salami slicing of pensions, it is breeding investor confusion and is now acting as a deterrent to long-term saving. Change is required.
One of the answers is to take the politics out of pensions. This could be done by the next government putting together a Savings Commission. Its role would be to take a step back, take a deep breath, and look at how pensions can be remodelled for the 21st century.
How should tax relief be offered on pension contributions? Should it be made fairer so that higher rate taxpayers do not enjoy an unfair advantage? How can pensions be made simpler and easier to understand? What rules can be binned?
The Commission could then come up with a series of proposals which would be implemented by the incumbent government, devoid of political slant or necessity. Proposals which could be introduced mid-term, after we have walked through the Brexit door.
Of course, governments do not have a particularly good record when it comes to acting on the recommendations of commissions they have set up.
Nearly seven years ago, economist Andrew Dilnot was asked by the Coalition Government to come up with proposals for changes to the funding of care and support in England. His ideas, crystallised in the Dilnot Commission report of July 2011, were duly noted by government officials and then scandalously sat upon, left to gather dust.
Nevertheless, a Savings Commission has to be a good idea. Certainly better than yet more salami slicing. Let’s hope Theresa May or Jeremy Corbyn thinks so too.
Jeff Prestridge is Personal Finance Editor of The Mail on Sunday