Amid the Brexit chaos it is crucial that we don’t let important pensions issues get swept under the rug, says Sara Benwell
Chaos theory holds that a butterfly flapping its wings in Brazil can cause a hurricane in New Mexico. The point - that tiny causes can have surprisingly large effects.
Brexit, of course, is more like the ‘stampede of elephants effect’. The cause is large to begin with, but what remains true is that the outcomes from one vote held on a small island will ripple outwards affecting economy, politics and trading networks throughout the world.
And while some of those effects may seem obvious, it is hard to predict – or even imagine – how far the implications will eventually reach. If a herd of elephants stampede in a jungle in Africa – does Mars fall off its orbit?
One thing that is clear is that the UK pensions industry cannot and will not escape unscathed.
Already we have seen widespread political revolution. David Cameron’s resignation and Theresa May’s succession has led to a wholesale change of government ministers. Meanwhile, a power struggle in the opposition party will likely mean more upheaval.
Many of the debates that dominated pensions discourse over the last decade could become irrelevant”
These means that many of the known quantities in pensions – Ros Altmann, Stephen Crabb and Owen Smith (currently running for Labour leader) – are out, and a new crop of politicians have taken the reins.
Already policies we were confidently predicting in 2015 could be off the table. Indeed, many of the debates that dominated pensions discourse over the last decade could become irrelevant. Pensions policy is so reliant on the personalities responsible for making it, that ideas that were once de rigueur could find themselves suddenly out of favour.
Of course, personality isn’t everything in pensions and the other driving force in policy has often come down the needs and wants of the Treasury – leading to a worrying level of short-termism.
Brexit may well exacerbate this. If leaving the EU does cause the UK economy to stutter (or even fail) then those at the highest echelons of government will be taking a serious look at things like taxation and benefits to see how the budget can be balanced.
Ideas such as the triple-lock, and tax relief on pensions could all be up for debate”
In these situations pensions can be in a deeply precarious position, and the concern is that ideas such as the triple-lock, and tax relief on pensions could all be up for debate.
In some respects, the pensions industry is lucky. Unlike in the ‘elephant effect’ scenario we do still have some influence over events. The industry can lobby the new pensions minister and the Treasury to try and make sure that any changes that do happen are positive.
There has never been a more important time to do this. Parliament is in recess at the moment, but come the Autumn our new Chancellor of the Exchequer and parliamentary undersecretary for pensions will be deciding what is important to them.
Brexit will continue to dominate political discourse, so it is crucial that we don’t let important pensions issues get swept under the rug.