- Andy Burnham called for a more collaborative politics in a speech in Manchester today, with less point-scoring and more long-term thinking
- He said that if he becomes prime minister, he will work with all parts of the party and reach out to other political parties to find common ground
- This could break the barriers to tackling some particularly thorny financial issues: establishing a sustainable future for the state pension, bringing stability to pension taxes, solving the problem of pension shortfalls and addressing the growing issue of care in older age
Tom Selby, director of public policy at AJ Bell, comments:
“Andy Burnham’s call for politicians to work together instead of battling one another reflects something AJ Bell has been saying for years. There are some financial issues that are too important to be political footballs that need parties on all sides of parliament to work together on a lasting solution to provide certainty and security for generations to come.
The triple lock
“Politicians of all stripes remain steadfastly wedded to the state pension triple-lock, despite growing criticism of the cost of the pledge and the potential intergenerational unfairness it is baking into the system. The reason is almost certainly cold political calculus. A significant section of the public support the triple-lock, particularly older voters, and any party indicating it will not pledge allegiance to the policy risks a voter backlash.
“Making a change requires cross party agreement, taking the politics out of the equation to ensure a fair and sustainable state pension. The starting point needs to be setting out what the triple-lock is aiming to achieve and establishing a path to reach that goal. At that point, the promise can be shifted to either a single or double-lock to earnings and/or inflation, with a strong argument for smoothing out these measures over time to avoid the unpredictable spikes we have seen in recent years. This would at least provide a degree of stability, giving people a better idea of what the state will provide and from when, and what they need to build up for themselves to fund the retirement they want.
Pension tax
“AJ Bell has consistently campaigned for government to commit to pension tax stability, with a focus on key tax incentives – tax-free cash (Pension Commencement Lump Sum) and tax relief on contributions. Constant speculation about potential changes to retirement saving incentives, particularly tax-free cash, undermines confidence in the pensions system and leads to people making irreversible decisions based on fear, rather than their long-term financial goals. This is an unacceptable position given pensions form the cornerstone of long-term financial planning and personal financial responsibility.
“Cross party agreement on a Pension Tax Lock would deliver much-needed certainty for savers and enable millions of people to plan for retirement with confidence, without the fear that a change in government would take them back to square one.”
Pension adequacy
Rachel Vahey, head of public policy at AJ Bell, comments:
“The Pensions Commission has published its interim report, warning that around 15 million people are not saving enough for retirement today – and that number could rise to 19 million by the 2050s. It highlighted key groups of people who are particularly vulnerable to under-saving including women and self-employed people. It is currently working on recommendations to tackle that challenge.
“The success of the first Pensions Commission, and the establishment of automatic enrolment – which has helped transform people’s pensions in the years since – hinged on political parties working together. We need to see the same approach when it publishes its final report, where sensible proposals are backed by politicians across the political spectrum for the long-term, to give people stability to plan for their future and protect the retirements of millions more people in the years to come.”
Social care
Sarah Coles, head of personal finance at AJ Bell, comments:
“Plenty of governments have tried to tackle the issue of the rising cost of care in old age. Several of them investigated the problem, proposed solutions, and even made promises. However, eventually they all came up against the fact that the cost of care is astronomical and growing – and requires either significant government spending or a hefty burden on individuals. Both were such difficult messages to deliver that they kicked the can down the road.
“In the meantime, care continues to cost some people everything they have, while others never have to pay a penny. Meanwhile, the rising cost to the state raises the risk the system could change in the years to come, leaving people high and dry – with no time to put their own safety net in place.
“The uncertainty makes it incredibly difficult to plan effectively for. In the past, people could carve out a chunk of their pension pot in case it was needed for care, but dragging pensions into the inheritance tax net will mean those who don’t need care could end up being stung with inheritance tax. People need to know where they stand, with a guarantee of a fair system that isn’t going to change when the government does, so they can confidently plan decades ahead.”