To complete the circle all we need now is to make families take more responsibility for their elderly rather than depending on the state and the Blair promise would be with us at last.
And, at a stroke, the moral hazard question that some critics claim the chancellor has introduced by giving savers more access to their pensions would be fully answered. The real moral hazard is to compel people with very small pension pots to annuitise only to benefit from very small annual incomes, not the fear of wasting their savings.
The argument about squandering their pension pot is one often used by the nanny state, that despite improvements in our education and basic common sense only a self-select group of ‘experts’ know how best to spend our money.
Of course, it will be wrong to encourage hard-pressed pensioners to take 25 per cent of an already small pot as tax-free then enter a drawdown arrangement with a provider with a likelihood of paying a massive 55 per cent higher rate of tax on their drawdown.
Critics often forget that one key democratic value is the right to make mistakes and government can overcome this moral hazard by devising a safety net fund for those who have overspent their savings.
For a minimum contribution people will know that at least in their old age they are likely to receive a given income and that is it. In fact, we may even see the return of a 21st century Poor Law for the seriously destitute.
In any case, annuity providers invest in the equity markets, there is no rational reason why individuals, with solid professional advice, cannot do the same for themselves.
The final step the chancellor must now take is to make pensions, or long term savings, compulsory. Auto-enrolment is just a first step.
The reality is that in policymaking we must factor in that a large number of people – up to 10m? – will always be dependent on the state for a variety of reasons: physical and mental illness, those for a number of other reasons who were taken out of the contributory and auto-enrolment systems, etc.
The elephant in the room of all this is auto-enrolment, the demographics of its likely members, those who opt out and their retirement provisions.
What we do know already about the Nest, NOW and B&CE auto-enrolment vehicles is that opt-outs are far fewer than we had anticipated, but the people who are opting out are the older people, the very ones staring pensioner poverty in the face.
