The Pension Freedoms Inquiry - an Existentialist view
Man is condemned to be free; because once thrown into the world, he is responsible for everything he does.
According to French existentialist philosopher Jean-Paul Sartre, freedom is inescapable. We are forced to make choices one way or another. It’s the realisation of this that leads us into ‘existential angst’.
The pension freedoms in 2015 were a bolt from the blue, not to mention a massive deviation from the status quo, and the industry did not have a huge amount of time to adapt. The FCA is going through its period of angst with its ongoing Retirement Outcomes Review. It’s now the turn of the Work and Pensions Select Committee and its pensions freedom inquiry.
The closing date for written evidence from the public has been and gone, and the Committee has now received oral evidence from Dr Ros Altmann and Sir Steve Webb among others. A few themes are starting to emerge.
- Some people are going to run out of money later in life.
- Some people are worried about running out of money.
- A small number of people are spending their money on drugs and alcohol.
- A fair number of people don’t understand how it all works.
- Not everyone understands the value of qualified financial advice.
What strikes me is that none of these is a pensions issue – these are all issues whether you’re talking about pensions or just life in general.
For instance, we already have bank account freedom, ISA freedom and dealing account freedom. Once my salary comes into my account, what’s stopping me from draining it all and blowing it? The answer is me, and me alone.
An existentialist might look at that and wonder why we only seem to have this debate about pensions and not other financial products. This might be partly explained by the history of pensions and their original intentions, but is that still relevant in today’s climate?
My concern with this inquiry is that we end up with another layer of controls and another set of rules, which look to hamper or restrict this inescapable truth of choice. There’s a risk that all this will do is further frustrate or alienate people.
We’ve seen a glimpse of this already with the £30,000 advice rule on Defined Benefit transfers, where initial stories in the press centred on people who were upset about being ‘forced’ to pay thousands of pounds for advice. The advice was sound, the process was worthy, but the choice to transfer had already been made.
Sartre argues that people are ultimately responsible for themselves and they will always have the burden of free choice. Indeed decisions around our personal finances can often carry the heaviest burden.
But rather than making more new rules, however, an existentialist might suggest that we look instead to ease that burden by making sure there is sufficient information, guidance and advice out there for all pension scheme members.
Beyond that, we have an ever-changing pensions systems with levels of complexity bordering on the absurd, and I’m sure anyone reading this can reel off half a dozen things they would like to change, whether it’s the lifetime allowance, the annual allowance taper or the IHT treatment of death benefits. None of this helps people to make the right choices.
We can debate the merits of existentialism (ideally to a backdrop of jazz, Gauloises and turtleneck sweaters). The bottom line though is that we all have freedom to make choices in life. Instead of trying to restrict that freedom, why don’t we focus on making those choices easier.