The waiting is the hardest part

Millions of American wake up today to know their medical bills are covered by the insurance of Obamacare. Thousands more employees will be enrolled this month in Britain’s universal second tier pension system. So 0n both sides of the Atlantic inclusive reforms are democratising the welfare process

The opposition within America to the democratisation of healthcare has aroused prejudices as strong and irrational as those fostered by Senator Joe McCarthy. For the creeping hand of communism, consider the new right wing bogey, the alien terrorist threat from a President who embodies what the American right is not.

And yet, albeit diluted, healthcare reform has arrived and the piecemeal American welfare system now has some coherent principles that ensure American are not left untreated for want of money.

We shouldn’t underestimate the impact Obama has made on this debate nor the resilience he has shown in getting these reforms in place. What has done is not easily undone.

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The parallels with UK auto-enrolment reforms, though not exact, are instructive. As a result of the persistence of Steve Webb (and the protection of Ian Duncan-Smith) the happy chance of a coalition Government has allowed the auto-enrolment reforms of another administration to be seen through.

The reforms are behind the original schedule and their impact, in terms of improved outcomes will not start to be felt until well into the next decade, but these reforms are happening. Let us hope that they will not be unpicked in the way that SERPS was unpicked.

Time has been on the side of both Obama and the coalition. Both are on fixed term administrations, the value of which can be seen in the certainty of timing within the reform Calendar. April 2014 represents the last point at which primary legislation can realistically be enacted within the term of the coalition’s office. Consequently the reforms surrounding workplace pensions currently under consultation at the DWP are “do or die”.

We all know this, the wait for the pronouncement from Caxton House which should not take us too long into January, is painful but necessary. Policy cannot be decided without consultation and consultation (in the shortest of time-frame) has happened.

My personal hope is that we have definite rules imposed on auto-enrolment workplace pensions that prevent them becoming a cash-cow for the financial services industry and enable confidence in workplace pensions to return. I am pro a charge cap, and an inclusive cap, because I cannot see the market as functioning in the consumer’s favour without intervention. I am pro the inclusion of the majority of transaction charges because any loopholes will be exploited (and most of the loopholes are in the murky areas of transactional costs. I will be  disappointed if the DWP backs down from its aggressive stance for fear of vested interest groups.

But I am prepared to wait for the implementation of some of the more difficult aspects, in particular the rewriting of insurer’s legacy books concurrent with the stress of 2014/15 auto-enrolment. Hence my acceptance of some aspects of the ABI’s proposals in their response to the consultation.

I am also prepared to wait for a long-term fix to the annuity crisis (expecting this to be the adoption of CDC in one of its variants). In the meantime, the financial services industry must do what it can for those having to retire using the current broken annuity system.

America must wait for Obamacare 2; we must wait for the second (and third) rounds of pension reforms. Those of us who have been around a few years know that things come to those who wait. Or so the inner optimist tells me!

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