Karl Marx once described religion as “opium for the masses” – the same could be said of Government commissioned reports.
The Government has no idea what to do about the problems associated with our rapidly ageing society. Hence the recent glut of reports – Ron Sandler’s review of long term savings and Alan Pickering’s proposals for pensions simplification to name but two of the more elaborately hyped studies. Such reports may help to placate us with the idea that the Government is actually doing something to close the estimated £27bn gap in UK savings and, in doing so, to heroically defuse the ever threatening “pensions timebomb”. But will these reports make one jot of difference to the current situation? It is doubtful.
In its current form, the UK pensions system will indeed face monumental problems in the future. But until the Government acknowledges that it needs to put its own house in order it is difficult for insurers and advisers to sell products with confidence.
Which brings me neatly to that other “ageing” problem – the issue of long term care (LTC). The Government doesn’t know what form LTC regulation should take so it has simply abandoned the idea for the time being. (Fortunately, the ABI has stepped in with its proposals to strengthen the industry’s voluntary code of practice on the sale and marketing of LTC insurance until a statutory regime is implemented).
Maybe the bulk of the Government’s current problems are due to the fact that it simply focuses its attention on what it perceives to be wrong in the private sector and fails to adequately recognise the interdependence of the public and private systems.
The Institute of Public Policy Research (IPPR), a leading independent centre left think tank, in its recent report A new contract for retirement suggests a solution that would suit both parties.
The centrepiece of the IPPR’s suggested reforms is that the basic state pension should be increased to the level of the minimum income guarantee, indexed in line with earnings, and the official retirement age should be slightly increased to 67. This would massively simplify the current system as the Pension Credit would become redundant and SERPs/State Second Pension could be closed – making the basic state pension increases affordable. It would also guarantee that all pensioners escape poverty, according to the IPPR.
On the issue of LTC, the IPPR report shows that by making certain revisions to retirement policy, the Government could also afford to introduce free personal care for the elderly (as recommended by the Royal Commission).
The political rewards of such moves would be considerable, and would help the private sector providers to sell their products with confidence. Unfortunately, the IPPR report seems to have slipped by largely unnoticed. The insurance industry may be well advised to bring it to the Government’s attention, in responses to the Sandler and Pickering reviews, if we are to avoid further complexity and muddled thinking.
Suzanne Clarkson – Editor