Malcolm McLean: Is there hope for consensus in Brexit Britain?

By Malcolm McLean

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Sep 26, 2019

Pensions and wealth transfer have not been immune to the strains of an increasingly divided nation.

Is Brexit, and the bitter divisions it has generated, simply a self-contained event or more broadly a sign of an increasingly divided nation where traditional means of civilised debate and consensus are no longer holding sway?

This is the question I asked myself while watching the recent very acrimonious debates on Brexit in the House of Commons. These were a very clear indication of just how divisive and toxic this subject has become.

It was probably a mistake to offer up the original referendum in 2016 with a simple binary choice on what we all now know to be anything other than a simple issue, but even so I don’t think any of us expected things to get quite as bad as they now are.

And it is not just in parliament or the ‘Westminster bubble’ more widely that these seemingly unbridgeable divisions on Brexit are occurring.

They are taking place all over the country – via the media, in the workplace, at home, in the pub – dividing opinion between colleagues and friends, across and within families.

The question for me now isn’t so much when and how Brexit will take place – if in fact it ever does – but what will be its legacy in the longer term?

Many people believe we may have to come to terms with the fact we are now living in a dysfunctional and divided country.

I doubt that is completely true but I worry about some of the divisions emerging outside Brexit – on the intergenerational front, between the haves and the have-nots, between the North and South, the possible break-up of our union of nations, and in other respects.

Just pensions

On pensions, for example, we seem to be back on that old chestnut of talking about the gulf that exists between the public and the private sectors, and whether it is fair that public-sector schemes should be so much more generous than most of those in the private sector.

It is true, of course, that there are now very few defined benefit pensions open to accrual in the private sector, but they continue to be common in the public sector, albeit with some movement from final salary to career average.

Defined contribution dominates in the private sector, with many employers paying just the minimum of 3 per cent, while employer contributions to DB are easily five times this level – often more.

The bigger role of trade unions in the public sector – which have failed to engage younger members in new industries – is likely playing a role in this.

One critic, Irish financial adviser and TV presenter Eddie Hobbs, has called for a cap on public pensions at an affordable level.

He appears to make the argument that tax contributions from private-sector workers are needed to finance public-sector pensions, and he considers it an unfair transfer of wealth, saying: “Jobs for life and, with them, guaranteed pensions can only be sustained by a transfer of wealth from the majority to a minority.”

Incomplete picture

This is all very extremist talk and comes at a time when the government finds itself fighting multiple legal and media battles on several fronts.

After it lost against judges and firefighters on age discrimination, the law firm that acted for these groups is now preparing to take the issue to employment tribunals on behalf of public-sector workers more generally.

The government has also been forced to issue a consultation on pension taxation after doctors revolted against being hit with five-figure tax bills.

And, as the PPI misselling compensation push finally draws to a close, there are fears that claims management companies will turn their attention to pensions – perhaps in relation to Sipp investments or allegedly wrongly advised DB-to-DC pension transfers.

One has to ask whether all these actual and potential disputed areas are a sign of the times we live in, whether things are really any worse than they have been in the past, or whether it is simply a case of greater focus.

The answer to this may not be known for years – until future historians are able to look back at and assess the full impact of Brexit and any legacy it has left behind.

Malcolm McLean is senior consultant at Barnett Waddingham

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