Freedom is a double-edged sword. (Marlene Rybka/Flickr)
Show Hide image

Budget 2015: Government pension changes risk destroying the whole system

Far from giving pensioners more freedom, changes to the pension scheme risk leaving the elderly with nothing.

Today, under the guise of grey-vote populism, George Osborne led an onslaught against the future prosperity of British pensioners. In the Budget he will extend last year’s pension ‘freedoms’ from new retirees to all those who have a pension in payment. He will offer millions of people who today have a secure, guaranteed income for life the chance to spin the wheel of fate. Many will take up his offer, even though huge numbers will end up worse off. And the whole pension system could end up permanently scuttled: the future of all our retirements is at stake.

The chancellor’s retort is that he is creating choice and freedom. He says his critics are patronising when they suggest that people can’t be trusted with their own money. But no one is suggesting that large numbers will be wilfully irresponsible. Financial decision making is a tough business, and constraints and defaults often serve us well.  

Indeed this is the government’s view when it comes to building up a pension. The same should apply to how we spend it. Without some clear structure to help us spread money over our retirements we may spend too much too early - but equally many will end up hoarding more than they need to.

And Osborne ignores the most important point about pensions – that they protect us from risk. None of us know the day we will die, so we can try to be responsible and still end up making the wrong decision. Pensions protects us from this fate by pooling risks.

As individuals, we share with each other the financial misfortune of leading a long and happy life. People who die earlier than expected end up paying for those who live late, preventing late old age being blighted by poverty.

And collectively, we place a bet with the insurance industry. Insurers provide guaranteed incomes based on how long they think each generation will live: if their calculations turn out to be too pessimistic, as has been the case in the past, it is they who are out of pocket, not pensioners themselves.

All that will go if Osborne succeeds in turning pension pots into giant ISAs. They will just be personal savings accounts, with none of the pooled benefits of a pension. In the name of freedom, it will mark another example of the individualisation of risks we cannot mitigate - of decisions too uncertain to make alone. This is not the march of progress: our lives do not need to be so complex and insecure.

Supporters of the policy suggest that the risk averse will still be able to buy a pension annuity. But the evidence from other jurisdictions suggests this will not happen much in practice, even though a guaranteed income is likely to be in most people’s interests. It is not responsible choice to reject insurance against longevity, it is market failure.

Osborne is also doing a disservice to future generations of pensioners. In his decision to turn guaranteed lifetime incomes into savings accounts he has undermined what makes pensions pensions. Over time this will place the consensus on pension saving at grave risk. If pensions are just ISAs people will soon as why should employers contribute? why should the taxpayer? why should low paid workers be automatically enrolled to the detriment of their take-home pay? This slippery slope will lead over time to less pensions saving and lower retirement living standards.

Politicians must show that a different way is possible. It may not make sense for everyone to buy a compulsory annuity in their early or mid-60s, when people often have many years left to carry on saving and enjoying the possible benefits of rising capital markets. Investment-style pension products make sense in this context. 

But almost everyone should have a guaranteed income in late old age, from 75 or 80 onwards. Otherwise it’s not a pension. Changes are needed, but they will take time to get right. So, for now, the new government should pause the Osborne reforms because they will end up doing great harm to the people they are intended to serve. Then an impartial, evidence-driven pensions’ commission is needed, to save our pension system from politicians on the hunt for votes.

Andrew Harrop is general secretary of the Fabian Society.

Photo: Getty
Show Hide image

Who will take responsibility for the rise in far-right terrorism?

Muslims are asked to condemn Islamist terrorism – should the mainstream right do the same when the attackers are white?

Following the attack on a Finsbury Park mosque, both Theresa May and Amber Rudd have issued statements and delivered speeches adopting hard lines against Islamophobia and right-wing extremism. May has gone so far as stating that Islamophobia itself is a form of extremism.

These pronouncements have drawn positive responses from prominent members of the Muslim community such as Miqdaad Versi of the Muslim Council of Britain. But it is important to question whether or not this change in rhetoric signifies a genuine change in government policy.

On the face of it, there are reasons for tentative optimism. The seriousness with which politicians took the Finsbury Park attack is a significant change. On this, the government is ahead of the media. While other terrorism attacks have been condemned as unjustifiable violence, some newspapers framed the Finsbury Park attack as a "revenge".

In fact, radicalisation is not a one-off event, but takes place in a web of institutional, social and ideological conditions. Furthermore this ignores a much longer story about the drip, drip, drip of Islamophobic or anti-Muslim discourse which permeates British society. 

The government has played a part in legitimising this anti-Muslim sentiment. Let’s not forget that Prevent has, since its inception, disproportionately targeted Muslims. The impression of an "us and them" mentality is only underlined by its secrecy. Moreover, the Prevent agenda has conflated a variety of other social policy concerns relating to gender equality, sexual violence, and unemployment as "extremism" issues. For example, Amber Rudd herself suggested that Islamophobia would decline if grooming stopped, which can not only be seen as victim-blaming, but further contributes to stereotyping Muslims as the enemy within.

So are promises to get serious about Islamophobia more empty words from the Prime Minister?

Think about timing. Far-right extremism has been deadly. Mohammad Saleem was brutally murdered in 2013 in Birmingham by a far right extremist. Mushin Ahmed was killed in 2015 (and was notably called a "groomer" by his attacker as his head was stamped on).

Jo Cox was murdered by a far-right extremist this time last year. This is not even mentioning individuals such as Ryan McGee, who made a nail bomb and was intent on murdering immigrants.

Just twelve days ago, the Prime Minister claimed that Britain was too tolerant of extremism, and she was right. Just not in the way she meant it.

Britain has indeed been too tolerant of extremism of the far right kind. This is a rising problem, not just in the UK, but also in Europe.

According to the defence and security think-tank RUSI, far right extremists make up 33 per cent of the threat, with Islamic extremism slightly more at 38 per cent. Furthermore, one in four referrals to Channel, the UK deradicalisation programme, are from the far right.

We cannot forget the government itself peddles the tropes of far right hate. Think of David Cameron referring to migrants as "swarms", May’s hostile environment policy, complete with "go home vans" driving around in multicultural areas, and the uncritical embrace of Donald Trump’s presidency by the Prime Minister. 

The Muslim community has been told many times to fight terrorism from within, but will there be a similar response to far right extremism? The ongoing rhetorical attacks on multiculturalism, and the longstanding association of Islamist radicalisation with a lack of integration, rather than religiously inspired political violence, make it difficult to see how real change will happen.

This would require deep soul-searching, followed by serious changes in public debates about policies relating to both immigration and extremism. Until that happens, May’s words on Islamophobia will be nothing more than political PR.

But this PR also has a more sinister element. Although no specific new counter-terrorism legislation was announced in the Queen’s Speech, there was a promise that the government would review existing counter-terrorism laws, with a spokesman stressing that new legislation would be brought forward if needed.

May continues to lobby for increased executive powers to fight terrorism, which she has done since her time as home secretary. The policy on right-wing extremism is likely to follow that of Islamic extremism: it will focus only on ideology and it will ignore the wider context of structural racism and white privilege.

Ask yourselves, will white men ever be stopped and searched to the same extent as brown men? Will white women be seen as easy targets for violent attacks as Muslim women disproportionately are? Will far right extremists fear for their citizenship status?

And does the solution to extremism, in any form, truly lie in further oppressive legislation and more government power? We also need to be aware that powers extended to address extremism are likely to continue to have a disproportionate effect on minorities.

As long as there is no change in government policy, the status quo will continue to reinforce the same divisive narrative which is the bread and butter of every extremist group. After the Queen’s Speech, we continue to see no evidence of any serious attempt to reform policy and seriously address far right extremism. May’s empty words after the Finsbury Park attack represent nothing more than an opportunistic political move from a weakened Prime Minister who is desperate for approval – and for power.

Dr Maria Norris is a political scientist researching terrorism and national security. She is a Fellow at the  London School of Economics and Political Science. She tweets as @MariaWNorris.

Dr Naaz Rashid is a Research Fellow at the School of Law, Politics and Sociology at the University of Sussex and is author of Veiled Threats: Representing the Muslim Woman in Public Policy Discourse (Policy Press 2016) about the UK government's engagement with Muslim women as part of its Prevent agenda. She can be followed on Twitter @naazrashid.

0800 7318496