Russia and the US: friends at last?

The former rivals form a politically symbolic alliance over a shared problem: Afghanistan.

The ancient Chinese proverb "The enemy of my enemy is my friend" has been a cornerstone of realist statecraft since the dawn of, well, realist statecraft. For example, Britain formed an alliance with its long-standing enemy, France, in order to counteract the Germans during the First World War. Responding to criticism of his Second World War allegiance to Stalin's Soviet Union, Winston Churchill claimed that "if Hitler invaded hell, I would at least make positive reference to the devil in the House of Commons".

Comparatively, during the cold war, liberal-democratic states often formed alliances with non-communist dictators, such as Mobutu of Zaire. The Soviet Union provided financial assistance to a handful of anti-communist states to strengthen their cold war sphere of influence. The US supported the Afghan mujahedin during the ten-year Soviet occupation of Afghanistan.

However, the principle alone may serve as a weak basis for alliance: after the break-up of the Soviet Union some of the mujahedin spawned the Taliban and turned against the United States.

Now, in a twist of fate, a partnership between Russia and the United States is materialising, based on this timeless principle.

Last week, Mikhail Gorbachev declared that, like the Soviet Union 21 years earlier, Nato would not be able to beat the Taliban. The 79-year-old former president claimed that no feasible increase in troop numbers could ever improve the situation for the US, and that Afghanistan is at risk of turning into "another Vietnam".

It seems that the Russians, thus far passive observers of the war raging in their backyard, have decided to contribute their topographical expertise in the area. Ironically, both countries are said to be articulating the definition of the alliance at Nato's Lisbon Summit on 19 November. This has been received with speculative cries in the field of international relations, Foreign Policy dubbing it "Nato 3.0".

Despite the cessation of the cold war, Russia has not extended its hand to the US in this way before. Nonetheless, Russia has not necessarily offered a hand of friendship, and there is speculation that Moscow's concerns are solely interest-fuelled.

It has been widely reported that the Russians agreed to assist the Americans with their operations in Afghanistan because Russia has one of the worst heroin addiction rates in the world. Its two million heroin addicts consume 21 per cent of the world's supply, and Russia blames the severity of the problem on the US's failure to spray poppy fields in Afghanistan.

Last Friday, Moscow announced that a joint narcotics raid with US forces had destroyed four drug laboratories and one tonne of heroin.

This sudden change on the international playing field invites a host of fresh and important questions for foreign policy experts. If Russia and the US achieve their common goal, will the alliance between them survive? Do these former rivals share enough common ground to be considered friends? And what is the true nature of this politically significant alliance?

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: products-and-investments/ pensions/pensions2015/