But will a Department for Pensions and Ageing Society solve the problem?
Splitting pensions, long term saving and care into separate silos is wrong, pensions minister Steve Webb has said.
“Your pension outcome depends on every aspect of your life. It depends on your life expectancy, on what sort of education you’ve had, what your career path is, what sort of firm you work for, whether you’re single, or married, or divorced. It depends on everything. So everything affects pensions,” said Webb.
“And that’s what makes it so unendingly fascinating to me … that to get pensions policy right, you can’t just think about pensions. You’ve got to think broadly. But what do we do in government? I’m going to invent a word here … siloise,” said Webb. “We don’t see people, we see policies.”
He called for the creation of a Department for Pensions and Ageing Society to end this tendency for government departments to work individually.
As his observers are well aware – and he would be the first to admit – Webb has a tendency to speak off the cuff, constructing straw men which later turn out not to have legs. But speaking at an event held by think tank Resolution yesterday morning, his passion for this issue was evident.
Combining care, the ageing society and long-term saving in one place could solve the problem, with joint ministers bridging the gaps, Webb argued. He also theorised that fragmented regulation being issued by the Pensions Regulator, the Financial Conduct Authority, the Treasury et al is not helping.
He expanded: “Think about your needs in retirement. We focus on income needs but what about care needs, and what about the overlap between the two? Because presumably you need resources in retirement to live off and you need resources in retirement to meet your care needs, potentially.
“Do we have an integrated financial product for care and for pensions yet? Not in a meaningful way. Why not? Partly because we siloise.”
At the heart of Webb’s idea is a desire to overcome bureaucracy, improve efficiency and ultimately, make life better for people. These are laudable goals and Webb should be commended for his vision.
Many in the industry agree that a more joined up approach to pensions and long-term care is a good idea.
“What we are seeing more and more is a lack of a joined up strategy when it comes to pensions policy and more widely,” said Darren Philp, head of policy and market engagement at B&CE, a mastertrust. “You have got a number of government departments which are responsible for various aspects – the Treasury, the DWP, other bodies like HMRC, the FCA, the PRA, TPR, and it’s all in a bit of a muddle.”
“I think that while it’s quite good to have some healthy tension between different departments with different objectives, what we’re seeing is policies that directly contradict each other and things not pulling in the same direction.
“To take one example, a lot of work was done on collective DC and defined ambition. The next minute, they open the whole retirement freedom market with the Budget reforms. The two don’t really go hand in hand. Collectivisation and individualism are two very distinct things,” said Philp. “For me, we need a long-term strategy that joins this up.”
Philp also agrees that more should be done to bring different types of saving together, since the new pension freedoms being introduced in April will make pensions resemble ISAs more closely than ever.
Malcolm McLean, a senior consultant at Barnett Waddingham, said, “I understand Webb’s frustration. You have the impression once or twice that he hasn’t necessarily been the originator of some of the policies, they’ve come from the treasury and he’s come into it afterwards.
“I also understand what he means about working in silos. You speak to someone in the department and find out that they deal with one thing, but not with something else. I had an occasion to speak to the DWP about the State Pension and had to speak to one person about the statements and the forecasts, somebody else about the qualifying conditions, somebody else about the new schemes,” said McLean.
Yet both Philp and McLean are unconvinced that an overhaul of governmental and regulatory structure is the best way to achieve more clarity and consistency.
Philp says that it can be useful to have some tensions between different arms of government, so that different policies are properly debated and considered in the round. He agrees that governments should have an overarching framework, with coherent policies.
Philp says: “The important thing is that when it comes to manifestoes and developing policies, they’re done within a coherent framework and on the basis of evidence. That’s one of the reasons why we’ve said that it would be good to have an independent pensions body, like an OFPEN, the Office of Pensions Responsibility, that analyses the evidence and holds the government to account against its stated objectives.”
McLean dismisses Webb’s suggestion as impractical. “To achieve what he wants, you would have to have one department covering the entire operation of government, which is just not practical … The bigger the department, the more it subdivides down.
“Over the years, I think people have recognised the overlap that pensions have with a whole raft of other things. Social care is coming into focus now as something that should be linked into it. But I don’t think you’ll ever get to a situation where you’ll be able to say we have everything confined into one department. It might be an aspiration, driven by some frustration about some of his experiences, but I don’t think it’s practical to cover everything.”
McClean does concede that pensions is a wide-ranging subject and that it is very confusing for people trying to make retirement choices. “It’s when it gets down to the individual level that you suddenly realise how difficult it is to link these things all together and the level of confusion that probably exists amongst the public,” he says.
“The new freedoms are welcome, in terms of the flexibility that they give, but flexibility and simplicity have never gone together. We’re now into a period where pensions are going to get a lot more complicated, from a base where they were complicated in the first place. I don’t think we’re quite appreciating how difficult and complicated it is going to be for the new guidance service to explain it all.”