What did Richard Harrington’s speech tell us about the man in charge of pensions policy?
Undersecretary of state for pensions Richard Harrington made an early outing on the pensions conference circuit at the PLSA. Here are five things we learned.
1. He’s in listening mode
Harrington follows two ministers who had a strong pensions background before they took up the role. He’s candid that his career as a property developer means he is an unknown quantity for the pensions industry.
Harrington was unapologetic, however. “I don’t think it is unusual to have a minister without a background in the field,” he said. “And I don’t feel it’s right to criticise either the system or me.”
But he did, in time honoured fashion pledge to listen to all comers as he gets up to speed on the subject.
Harrington said he had already called in the heads of six or seven DB pension schemes to see how the government could help them.
2. He’s nobody’s crony
Harrington was very keen to impress on the conference that he was no stooge. How successful he was is open to debate.
“I’m not there as a crony of anyone,” he said. “Although I know Theresa May quite well – she was at university with me and I served under her at the home office. I happen to know Damien Green very well because he signed me up at freshers fair about 40 years ago.”
Harrington also stressed that he had asked Green for the pensions brief when he was appointed to the DWP.
“I asked for this, and I’m glad to be doing this,” he said. “I felt I should mention that because a lot of people say ‘obviously he’s there to do Theresa’s dirty work’ or ‘he’s a stooge of this’ or ’he’s a non-entity’.”
As well as enjoying good relationships with the Prime Minister and secretary of state, Harrington is “good personal friends” with a number of key Treasury ministers. This should come in handy given the often fraght relationships between the two departments.
3. He wants to get stuck in
Harrington said he had made some key calls already. He took joint responsibility with Simon Kirby at the Treasury for the decision to scrap plans for separate guidance bodies for pensions and debt.
“I was very unhappy when I saw proposals about the issue of having two separate guidance bodies - one for debts and money matters and one for pensions matters,” he said. “I’m afraid I didn’t understand the rationale. It’s the same customer, why would we have two separate bodies?”
But Harrington was full of praise for Pension Wise, suggesting the organisation is set for an expanded role.
Speaking to journalists after his speech, Harrington said the decision to drop secondary annuity market plans was also driven by him and Kirby.
“I was not satisfied that there would be a proper market and that consumers would not be taken advantage of,” he said. “I did not want a situation where unscrupulous operators would take advantage of people by buying a product off them without them properly understanding it.”
4. He is unimpressed by schemes’ investments
Harrington professed himself baffled that UK schemes were missing out on some lucrative investments.
“As an outsider I look at these schemes and think ‘crikey – most of the things I made money out of they are not touching’,” he said.
“The best investment I’ve ever seen in my life are these residential investment schemes where people like Barratts are producing new builds for rental - I’d be queuing up for it if I was running a pension fund because historically you’ve got the best capital appreciation, a yield built in, a shortage of product.”
Harrington continued: “And then I found when I became an MP, the largest employer in my constituency is owned by Ontario Teachers Pension Fund - Camelot. They come over every year and I do a dinner in the House of Commons because it’s a big employer, and one of the teachers said to me ‘why were we allowed to buy this – it’s like the best investment we’ve ever made’. It’s guaranteed annuity, basically guaranteed by government because it’s regulatory – of course unless people stop buying lottery tickets but everything has some degree of uncertainty.”
The minister suggested a lack of scale could be one of the reasons. “Perhaps government needs to nudge it,” he said.
5. There will be no Pension Commission
Predictably, one of the first questions Harrington took from the audience was about setting up a non-political commission to propose pensions policy. He gave the idea very short shrift.
“We are elected as politicians to represent our constituents and that’s the way our government works,” he said. “The commission would be another layer on top of it, but in the end the minister would decide and parliament would decide.”
Harrington said the wrangling over a third runway for Heathrow showed that commissions were often just a way of “taking longer to do what politicians would do anyway”.