Thomas Piketty with Labour strategist and peer Stewart Wood in The Gladstone Room in parliament. Photograph: George Eaton.
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Thomas Piketty comes to parliament: what we learned

A review of the French economist's appearance with Miliband strategist Stewart Wood.

After his recent bravura performance at IPPR, Thomas Piketty, the intellectual of the moment, appeared at parliament today in conversation with Ed Miliband's senior strategist Stewart Wood. The Labour peer and shadow cabinet office minister was one of the first in Westminster to recognise the significance of Piketty's Capital in the Twenty-First Century, tweeting before its British release: "Thomas Piketty's book predicting ever-growing inequality is making waves. We need to start debating how to respond." Today, in the cavernous surroundings of The Gladstone Room (where the PLP and the 1922 Committee hold their weekly meetings), they did just that.

The most politically notable moment of the event, hosted by Class, came when Piketty warned Labour that its planned top tax rate of 50 per cent was "too low" to significantly reduce inequality (caused, as he meticulously documents, by the tendency of the rate of return on capital to outstrip the average growth rate of the economy). The Frenchman rightly noted the absence of evidence to suggest that higher tax rates than this on "very high incomes" (defined as £1m+) will "damage the economy". Although polls show that most voters support a 60p rate, it is a reminder of Labour's self-imposed political limits that there is no prospect of Miliband supporting it (even the 50p rate has been cautiously defended as a temporary deficit reduction measure).

Piketty was warmer about the party's backing for a mansion tax on properties worth more than £2m, but urged it to go much further in taxing wealth in general. One of the justifications he offered was that this would enable governments to reduce taxes on the poor and allow them to begin accumulating capital.

He emphasised, however, that redistribution was a necessary but insufficient solution to inequality. As well as taxing the wealthy more and the poorest less, the state must also engage in "predistribution": stopping inequality before it starts. On the day that the Lib Dems pledged to ring-fence the education budget in future coalitions, he championed investment in education and skills, and a higher minimum wage as the key to a more equal society.

While Piketty is often assumed to be a revolutionary socialist (partly owing to his book's conscious allusion to Marx), his comments today were a reminder that he is actually a mainstream social democrat. He noted several times that he has "no problem with inequality per se" and argued that "up to a certain point, it can be useful for innovation and for growth".  It was "extreme inequality" that was indefensible, he said.

Challenged by my former NS colleague Mehdi Hasan on whether Labour's programme was truly bold enough to respond to Piketty's diagnosis, Wood emphasised the party's commitment to both redistribution and predistribution and said he was keen to encourage "debate" among all parts of the political spectrum on how to do more.

Among the wonkish discussion, some light relief was supplied by Len McCluskey. In his question to Wood, the Unite general secretary mistakenly referred to him as an Arsenal fan. The lifelong Liverpool supporter, whose official title is Lord Wood of Anfield and whose Twitter avatar is the club's badge, looked appropriately mortified.

P.S. I interviewed Wood earlier today on Piketty's work and will be posting the conversation on The Staggers later this week.

George Eaton is political editor of the New Statesman.

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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/