Thursday, 25 May 2017

    We need a people’s pension commission

    Yes, we need a pension commission, but it should be made up of ordinary people, not industry stalwarts

    The call for a pensions commission is hardly new. The case is well known, if depressing: pensions policy is too important, and too long-term, to be entrusted to politicians, whose thoughts are dominated by the short-term electoral cycle. Much better leave this area to dispassionate experts who will act in the public good.

    committee chairs

    But this technocratic argument overlooks one of the main lessons of last year – a lot of people have just as little faith in experts as they do in politicians. A retirement system designed by the finest actuarial minds in the country may well be highly efficient, but it is likely to lack legitimacy in the eyes of many.

    This is particularly true because any changes to the system will involve difficult trade-offs, which are ultimately matters of political judgement. The government has tasked John Cridland with reviewing the state pension age, for example, but if ministers decide to accelerate planned increases they will find his report gives them little cover with the public.

    Ask the people

    So is there an alternative to leaving policy decisions with politicians or passing responsibility onto unaccountable experts? We could always turn to the Great British public. Or a representative sample of them at any rate.

    The idea of drawing lots to appoint ordinary citizens to important roles has a pedigree going all the way back to ancient Athens, and survives in this country in the institution of jury service. Beyond this narrow use it has generally fallen out of practice, however, in favour of elections.

    An intriguing book published last year, Against elections: the case for democracy by David van Reybrouck, makes a strong case for bring the practice back into wider use. He argues convincingly that electoral-representative democracy is in crisis because it increasingly lacks efficiency and legitimacy.

    The author’s proposal to remedy this by drawing lots to decide appointments for most branches of government will be a step too far for many, however.

    But he points to experiments in Canada, Iceland and Ireland where a degree of random selection has been used to put together committees to make proposals on specific issues. In the Irish example the Constitutional Convention – 66 randomly selected members of public and 33 politicians working under an independent chair – was responsible for the proposal to equalise marriage rights for same-sex couples passed in 2015.

    All these examples concerned constitutional change, but there is one area of policy that is ripe for the same treatment, surely it is pensions. Decisions taken will have a long-term impact on the whole population, so it makes sense to try to make the decision making process as democratic and open as possible.

    How it could work

    Here’s one way a people’s pension commission could work, drawing on some of the lessons outline by van Reybrouck:

    • A large pool of potential participants – say 2,000 – would be selected at random from the Electoral Register and by invited by post to put themselves forward for positions on a people’s pension commission, with information on how the commission will work, the time commitment involved, and the remuneration on offer
    • Participants who put themselves forward would be grouped into pots to make sure the resulting panel is representative, and a committee of 15 would be selected at random from these pots
    • The committee would then meet for a week, with professional moderators, and expert advisers, to learn about the current system, and the challenges of designing a retirement system, and discuss alternative arrangements, and agree some principles for future pensions policy
    • The committee would then reconvene on weekends throughout the year to develop these principles into concrete policy proposals, before publishing a report setting out a comprehensive plan for pensions policy
    • Committee members would need to be well remunerated to encourage participation, and the principles and early drafts of the report would be shared online to get feedback from the general public
    • The final report would be debated in parliament, with MPs voting on whether to adopt the recommendations
    • The committee would be reconvened annually to consider whether the original policy recommendations were still appropriate, and to assess and report on how the government was implementing the policies put forward
    • A third of the committee members would be replaced each year by a similar selection method to that originally used to ensure an element of continuity, and a steady supply of new members

    This arrangement would still leave ultimate power over pension policy with the elected government but would provide a democratic way of proposing and monitoring pensions policy.

    Sensible ideas

    And those in the industry who are concerned about the prospect of letting members of the public should look at a very unscientific experiment carried out by the PLSA at their conference last year.

    The organisation put together two teams of youngish people selected at random, and tasked them, under the tutelage of two pensions experts with coming up with ways of getting people to save more.

    Most of the suggestions they came up with – like improving financial education, building a pensions dashboard or removing the opt out from auto-enrolment – were on the industry’s radar already.

    So maybe a people’s pension commission would not come up with radical proposals. But it would probably come up with thoughtful proposals that balance competing needs and interests and take a long-term view of the challenge. Which is exactly what we need from pensions policy.

    Readers' comments (2)

    • I think the idea of a people's pension commission is sensible as the outcomes from such a commission should increase credibility in pension savings. However I do not think that simply picking people at random is necessarily the best way with pensions as it helps to have a reasonable basic knowledge of how pensions work. The commission could focus on the sad lack of member representatives on the IGCs which are supposed to watch over the pensions of the millions of people who have been auto-enrolled into contract based pensions. The members of the IGCs are all clever people from the pensions industry but not one is truly independent of the industry and therefore able to act in the members' interests.

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    • Anonymous

      I absolutely agree with the IGC comment (and the same goes for master trusts). But why is prior knowledge of pensions a prerequisite for the commission? I know some excellent trustee chairs who have no pensions background. And going for the jury system analogy, we certainly don't expect jurors to know anything about forensics (for example) before they are called up.

      Jack

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