Behind the scenes at US-Iran talks

What factors will really affect the outcome of negotiations between the US and Iran?

The widely anticipated handshake between Barack Obama and Iranian president Hassan Rouhani at the United Nations General Assembly never happened, but today US secretary of state John Kerry and Iranian foreign minister Mohammad Javad Zarif will meet, the highest-level meeting between the two countries since 1979. So what are the main factors affecting negotiations?

Rouhani's personality

Rouhani has been widely labelled a ‘moderate’.  Not everyone agrees with this label, but his diplomatic style is certainly a stark departure from that of his confrontational predecessor Mahmoud Ahmedinejad, and he’s launched what the Economist describes as an ‘unprecedented charm offensive’. This includes releasing some political prisoners, condemning the Holocaust and switching control of nuclear policy from the national security council to the more moderate foreign ministry. Sceptics, however, warn against pinning too much hope on Rouhani, suggesting that he’s too close to Iran’s hardliners and is simply using a different strategy to achieve the same old, unfriendly Iranian goals.

Iran’s economy

Years of sanctions are taking their toll on the Iranian economy, and present an urgent problem for Iran’s new president. Youth unemployment is almost at 30%, the value of the rial has halved, and inflation is soaring – official figures place it around 39% a year, but some estimates by independent economists are as high as 60 to 100 per cent. This means Rouhani will be seeking a lifting of US sanctions as soon as possible. It may also mean that if the US waits too long to ease sanctions, Rouhani will struggle to convince hardliners in Iran’s Revolutionary Guards that his diplomatic strategy is worth it.

Hardliners in Iran

Rouhani will need to keep the more conservative Revolutionary Guards on side, and will need to maintain the approval of Ali Khamenei, Iran’s supreme leader. For the moment, Khamenei’s slightly opaque remarks about the importance of “heroic flexibility” suggest he’s happy to support Rouhani’s efforts, but Khamenei may yet change tack. If Rouhani is able to win concessions from the US quickly and this is reflected in an improved economic outlook in Iran, this will strengthen his position against more conservative forces.

The US and its allies

Obama is keen to avoid confrontation with Iran, particularly given the ongoing Syrian conflict, but he needs to ensure that he isn’t seen to concede ground too easily to Iran. Not only will this reduce the US’s future bargaining position, but it will inflame those in government who are sceptical of Iran’s intentions. Obama will also be aware that if he gives too much ground to Iran, this will worry and anger Israel, who already believe that Obama’s failure to use military force against Syria sets a dangerous precedent.

Iranian President Hassan Rouhani addresses the U.N. General Assembly on September 24, 2013. Photo:Getty.

Sophie McBain is a freelance writer based in Cairo. She was previously an assistant editor at the New Statesman.

Show Hide image

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/