Much of this speculation will focus on and be driven by current economic and political conditions and the need to prepare the UK for a post-Brexit world.
As someone with a lifelong interest in the study of history, my own preference is to look back in time to see if we can gather any hints as to what might happen from what we have seen before.
My starting point was to look at the major policy initiatives which were launched during the Chancellor’s previous time working in the Treasury. As a reminder for those who haven’t been following his career, the Chancellor spent the period from 4 September 2012 to 7 October 2013 as the Economic Secretary to the Treasury, at which point he was promoted to the role of Financial Secretary to the Treasury, a role he held until 9 April 2014.
Looking at that time, one financial services policy initiative stands out above all others – the announcement of the pension freedoms in George Osborne’s Budget on 19 March 2014.
Only a limited number of individuals and organisations were given anything more than a cursory warning, if they received any prior notification at all, regarding the proposals. Many have speculated that bodies like the Financial Conduct Authority (FCA) received virtually no notice.
One thing of which we can be certain is that the then financial secretary to the Treasury, now Chancellor, would have been one of the select group of individuals who were ‘in the know’ about the plans.
Given his then role, one would assume Mr Javid not only knew about the plans, but was a supporter. If this was the case, what might this mean in terms of his views on pensions?
Possible assumptions are that he is:
- Not wedded to the idea that the main purpose of a pension is to provide a secure and regular income in retirement;
- Not afraid of radical policy initiatives – we are after all talking about an individual linked to the “most far-reaching reform to the taxation of pensions since the regime was introduced in 1921”;
- Happy to dismantle existing tax regulations.
Further evidence for this last point is hinted at by comments made by the Chancellor on inheritance tax at the 2019 Conservative Party Conference. He stated, “I shouldn’t say too much now but I understand the arguments against the tax. Sensible changes have already been made but it’s something that’s on my mind”.
A pension policy initiative that could be on the Chancellor’s mind, bearing in mind the historic evidence, is early access to pensions. The Treasury last looked at this option by publishing a Call for Evidence in December 2010, with the resulting summary of responses published in April 2011.
One of the three principles upon which the Call for Evidence was based was that the purpose of UK tax-relieved pension saving remained to provide an income in retirement. The summary of responses to the call highlighted that the majority of respondents expressed concern that early access would put this principle under threat.
This is interesting in the context of the introduction of the pension freedoms, which effectively ripped up this principle. The launch of the Lifetime ISA in 2017 also strengthened the evidence that policymakers see value in products which allow savers access to their funds ahead of the age at which individuals traditionally retire.
Many respondents believed the introduction of early access should not be considered until the impact of other initiatives, most notably the introduction of automatic enrolment in 2012, had been assessed.
The automatic enrolment review of 2018 started this process, though I’m sure many would question whether a full assessment is yet possible. But we can agree we’re now much further down the line than we were in 2010. In its response to the Call for Evidence, the government committed to looking again at early access once automatic enrolment had been fully phased in.
Appetite for change
If I was to raise the question of whether early access to pensions was a sensible policy initiative, I’m fairly certain a significant number of readers of this article would be against this. But interestingly, a majority of individual respondents to 2010’s Call for Evidence were in favour, showing there may be public appetite for this change.
When announcing the date of the Budget, the Chancellor said he would be looking at, “how we are going to help hard-working people in particular – especially with the cost of living”. Could the evidence of the Chancellor’s previous stint in the Treasury point to early access being looked at again?
Gareth James is head of technical at AJ Bell