Commission to the rescue?

11 March 2015

The Coalition has overseen a series of bold pension reforms, including the implementation of auto-enrolment, introduction of a new single-tier pension, and – most recently – extension of freedoms to defined contribution pension pot savers.

These policies have helped reverse the long run decline in pension scheme membership, but the UK still faces a huge challenge. With the population ageing, state pension expenditure will increase from 5.5 per cent of GDP in 2018/19 to 7.9 per cent by 2063/64. Building on the private pillar reforms rolled out by the Coalition will be a core part of the next government’s response to this task, but where should efforts be focused? Auto-escalation and default options are attracting increasing attention, but there are also legitimate concerns about how existing reforms will play out, with Pension Wise the most obvious candidate.

Yesterday the Work and Pensions Select Committee touched on a number of these issues in their report Progress with automatic enrolment and pension reforms. Their core recommendation was the establishment of an independent pension commission to “review [auto-enrolment] implementation to date, to advise on changes and adjustments to [auto-enrolment]; to consider all the implications of the pension flexibilities introduced from April 2015; and to advise government on consequent amendments required to existing pension legislation, and on development of future policy.”

The structure of the Committee’s proposal mirrors the 2005 Turner Commission, the process through which auto-enrolment was designed. Noting the policy’s success, the Committee argued Turner’s recommendations were taken up precisely because they were grounded in political consensus, an evidence-based approach and the full involvement of stakeholders. The Committee argues that the concerns regarding the recent freedom and choice reforms could have been avoided by the same considered approach.

Bi-partisanship and evidence-based policy making is always welcome. However the introduction of a commission would be no silver bullet.

As the Committee recognises, the in-coming Government will need to tackle the issues raised in its report “as a matter of urgency.” But commissions take time – Turner was appointed in late 2002 and issued its final judgement in April 2006. If these timescales were repeated, any radical reform requiring new legislation would not be complete until 2020; 2019 at the very earliest. Given the urgency of the task at hand, the in-coming Government should consider whether it can afford these timescales.

But even if the commission issued its recommendations quickly, it is not clear the process is necessary. As envisaged by the Work and Pensions Select Committee, the commission would largely offer commentary on how existing reforms are being implemented. Commissions can fulfil an incredibly valuable function when wholesale change is required – Turner is a testament to this – but if all the Work and Pensions Committee wants is for existing policy to be scrutinised, then the merit of a commission is less clear. This process could also prevent the in-coming Government from rolling out further, much needed, reforms.

The establishment of a commission could well prove attractive, particularly if there is a new pensions minister getting to grips with their brief. However it could also provide an excuse for delaying difficult yet vital decisions that need to be taken now. If the UK pensions challenge is to be addressed, we need governments that are willing to govern – with or without the consent of an independent commission.

William Mosseri-Marlio, researcher, Reform



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