The problem with Cameron's "global race": we're losing it

What the Tories' latest PPB didn't mention: the UK has grown at a slower rate than every G20 country except Italy and Japan.

As you might have noticed by now, David Cameron is keen to remind us that we're in a "global race". In the latest Conservative party political broadcast (Britain in the Global Race), the PM declares: "we're in a global race competing against these new rising countries in the south and the east of our world, China and India, now I want Britain to be a success story". 

But while Cameron's international perspective might be commendable, it's not clear that it's in his interests to adopt it. If we are in a "global race", it's one we're unambiguously losing. As an analysis of growth by the House of Commons library showed last month, Britain is at the bottom of the G20 league table, having grown by just 0.4 per cent since the 2010 Spending Review, a worse performance than every country except Japan and Italy. 

Worse, as the TUC's Duncan Weldon has shown, IMF data reveals that the UK is currently 158th out of 184 countries, with total growth in the last three years of just 2.2 per cent, compared to 8.4 per cent for Germany, 7.7 per cent for Canada, 6.5 per cent for the US, 6 per cent for Japan and 3.5 per cent for France. While Cameron sets his sights on India and China, we're lagging behind "sclerotic" Europe.

Fortunately for the PM, voters aren't in the habit of consulting IMF tables and, after years of Labour "profligacy", are largely resigned to austerity. Liam Byrne's famously unhelpful note to David Laws ("Dear chief secretary, I'm afraid there is no money left"), cited by Cameron at the start of the broadcast, remains the gift that keep giving. 

David Cameron speaks to youth during his visit to the Mercedes-Benz UK National Apprentice Academy in Milton Keynes. Photograph: Getty Images.

George Eaton is political editor of 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/