Concerned about pension freedoms, paternalistic on drawdown and critical of the new complexity of the Lifetime Isa, shadow pensions minister Angela Rayner sees plenty of blue water between her party and the Government
While the Conservatives have been basking in the goodwill of the ready cash of pension freedoms, Labour is emerging from a period of reflection in which it has been working out its position on retirement provision.
Now four months in to her role as shadow pensions minister, Angela Rayner MP is positioning Labour as paternalistic, protecting the person in the street and unafraid to intervene in the market where it thinks the state can lead the way.
Appointed by Jeremy Corbyn, the most left-wing Labour leader for decades, Rayner, a former Unison union rep from Manchester, is tackling the issues facing the pensions industry firmly from the perspective of the ordinary men and women approaching and living through retirement.
“Nobody in my family has lived beyond the age of 65 so, when an actuary tells me I’m going to live to a certain age, I’m thinking ‘No I’m not, mate’,” says Rayner.
Behind the down-to-earth approach, however, Rayner demonstrates a keen understanding of the detail of pensions – an attribute she told her leader she did not want to be wasted.
“One of the conversations I had with Jeremy when I took on the role was ‘Do not move me again. If I am going to learn all this stuff, work with the individuals and get us to a position where we can establish half a page in the manifesto, I want some commitment that I’m going to be here for a while.’ And Jeremy said ‘You will be here as long as I am,’” she says.
“We have lacked credibility in the area of pensions because of the number of changes that we’ve had in our structure. I want to develop long-term policy. The industry needs stability and it hasn’t had that.”
The pension freedoms have been immensely popular for the Conservatives, and Labour has found it difficult to challenge them. So how does Rayner intend to make an impact with an electorate enjoying the lack of state interference in their financial affairs?
“The worst-case scenario is that you live until age 90 and, if you have spent your pension, someone else has to pick up the tab. As Ros Altmann has said, drawdown isn’t for everybody.
“The Government’s own pension minister is trying to back-pedal somewhat because she understands the risk,” she says.
So where can Labour make a difference?
“One of the things that differentiates Labour is protecting people – the welfare state and having a state safety net,” says Rayner.
“The Government has said ‘You can have all the freedom you want without any responsibility and we will catch you in the end.’ And that can’t be the case.
“If people want freedom and choice, for the Government there also has to be a safety valve, because it will catch them at some point.
“Why is it OK for people who have made the right decisions all their life to pay the tab of people who are going to be reckless and spend the lot?” she says.
Rayner’s concerns about the pension freedoms stem from the lack of access to financial advice for those with lower and medium pot sizes, and from the laissez-faire attitude of the Government should people end up making costly mistakes.
“Only certain people get advice at the moment. People in the middle earning bracket have got what, from their perspective, is a lot of money to lose but few avenues to get advice unless they pay for it, which most people won’t do.
“I am more paternalistic in my approach. Knowledge is power; giving people information so they can make informed decisions is important, and a lot of people are not getting access to the right information at the right time,” she says.
So would that mean a greater role for Pension Wise under a Labour government?
“Yes. But if you also look at what Nest offers and could offer in the future, you see there is the potential for a bigger role for the state where the market is not delivering what is needed.”
Rayner points to the Independent Review of Retirement Income – commissioned by Labour from the Pensions Institute in 2014 and published in March this year – which called for a number of proposals to build more reliable retirement outcomes.
That 588-page report, penned by Professor David Blake, set out a wide range of recommendations, including: a ‘safe harbour’ seal of approval for pensions, whereby the regulator would specify which schemes were of good quality; a single regulator for pensions; a new approach to advice to make guidance and help from employers easier to deliver; more formalised training standards for financial advisers; and a pensions dashboard.
Rayner sees Blake’s idea of a form of trust-based drawdown/annuity hybrid solution – which takes the advice cost out of the drawdown equation, thereby making it more suitable for a greater number of people – as one area where a Government nudge may be needed to fill a gap that commercial providers will be loath to address.
If the smart money says even individuals with middling pots would be better off, in all probability, with at least some exposure to equities through their 60s and early 70s, with guidance on withdrawal rates, but full advice costs would negate any upside and no commercial provider would be prepared to take the regulatory risk of delivering such a proposition on a non-advised basis, this could arguably be an area where market failure necessitates a government-backed solution.
“I would point to Professor Blake’s report, where he talks about how the trust market can evolve,” says Rayner.
She is also concerned that the low level of contributions for auto-enrolment may come back to bite both savers and the Government. For that reason she supports the proposal contained in the IRRI report for an increase in auto-enrolment contributions to 15 per cent over the long term.
Rayner says: “Auto-enrolment has been really successful but I am concerned that, when people find out how little they are going to get, they will be surprised. So this is a real concern and I feel there is a piece of work to be done there.
“I know this is sensitive because auto-enrolment works because people are passive. And as soon as you start taking a bigger chunk out, you can increase opt-outs. But there is a balance to be had and the state can play a role there.”
Rayner is unafraid to contemplate state intervention where there are perceived to be failings in the market.
“It is in our interest for the Government to be more forceful. Where we have seen interventions we have seen benefits, as with the Nest product, where the industry said ‘We can’t provide this’ so we created one.
“Nasa created all the technology that is in smartphones. One role for the state is enabling the private sector,” she says.
So should the Government commit to being part of the pensions dashboard by 2019?
“Yes, absolutely. You can’t tell everybody else to and then not practise what you preach. And state pension is a massive chunk of most people’s retirement income so it is vitally important,” she says.
On the Lifetime Isa, Rayner points to the Government’s own problems: the division within Whitehall, with the pensions minister opposed to the idea while Chancellor George Osborne apparently backs the concept.
Rayner and the Labour Party generally have kept their powder dry on what they think about a switch from EET to TEE, happy to watch the Government fight it out within itself. But on the Lifetime Isa itself, Rayner regards it as a distraction.
“Even Ros Altmann has been critical of the Lifetime Isa,” she says. “My concern is that it does not address the issue but brings in a new issue that wasn’t there. All it will do is help people like me who are already into savings and have the means to save more, and to get more benefit. People can do it instead of an AVC; people with adult children can use it. It benefits people who are already well engaged.
“If we have money to invest in pensions, it should be going through state pension or helping the auto-enrolment process with contribution rates. There are many other avenues where the state could invest rather than in this new type of Isa.
“Osborne was going to talk about pension Isas before the Budget and then suddenly he came out with a savings Isa that looks and walks and quacks like a pension. I think it was a fudge,” says Rayner.
She has been a vocal supporter of the Women Against State Pension Increase campaign, and has been active in Parliament pressuring the Government to do something to alleviate the pain suffered by many women in this group.
Labour is understandably cautious about making expensive policy pledges. On the Waspi issue, Rayner says the hardship felt by some of those affected is very real but it is up to the DWP to find a solution.
“We put options on the table in our opposition day debate, despite the Government saying we had not pinpointed the problem.
“The problem we have with pinpointing an exact problem and solution – and we have been looking at doing costings around this – is that we do not have access to the figures that the Government does. We know the original savings were £30bn and Steve Webb had said they were asking for £3bn of that and got £1bn in 2011. So there is a missing £2bn there straight away.
“So the Government has been disingenuous; it needs to do something. These women are not going to go away,” she says.
So should the Government match in full the payments for those who had thought their state retirement age was 60?
“The change was publicised, but to what degree is unclear.
It depends which cohort you are in; it is quite complex which groups are affected more seriously.
“But from my position the Government should be looking seriously at access and some more transitional arrangements. It did not even meet its targets in 2011 and did not know the implications of what it was going to do. So I think there is a question to answer on this one,” she says, highlighting the division within the Government on the issue and backing the position of her opposite number, the pensions minister.
“[Work and pensions secretary of state Stephen] Crabbe has got a decision to make now, on whether he backs his pensions minister, Ros Altmann, who says she wants to do something for these women. Ros is very respected in her field and the Government has dined off her credibility for some time. It needs to do the decent thing and listen to Ros and, more importantly, to the women affected and come to a compromise with them.
“I think allowing them the money early on an actuarially neutral basis is the least it could do, because some of these women are living in poverty now. It is not easy to get a job at that age, or change one’s plans. And these are women who have not only raised their children but some of them are also looking after their grandchildren to enable their children to go to work, and also looking after their elderly relatives because people are living longer.
“So they are contributing constantly to the state as carers. Many of them have got more than one caring responsibility. On many levels, there is an obligation on the Government to look at this issue and address it. But certainly a cost-neutral deal should be offered,” she says.
Rayner is perplexed by the Government’s refusal to accede to any of the demands of the Waspi protest movement.
“It is picking a fight and this is a fight you do not want to take on. An angry mum is someone you do not want to tangle with, as I said in my maiden speech. Angry women of that age, I would not want to tangle with.”
And should the Government be telling pension funds what to do with their money and where to invest it, including in infrastructure?
“Absolutely not. We are on a very slippery slope towards giving ourselves problems in future. We all know that, when politicians meddle, things go awry. I actually don’t think the Chancellor has the powers to enforce infrastructure investment,” says Rayner.
“And it’s astonishing to have a Labour politician telling a Conservative politician that they shouldn’t be meddling in a market through infrastructure investment. It is an individual pension scheme, owned by the members and run by the trustees. If not, where do we stop?”
ANGELA RAYNER – CV
January 2016–present: Shadow pensions minister
May 2015–present: MP for Ashton-under-Lyne; increased Labour’s majority and share of vote at 2015 general election
Previously elected a Unison union representative
Previously worked as a care worker for Stockport Borough Council