Pensions: Forget the manifestos and look at the politicians

This month British voters took out their machines gun and fired at will. Ed Miliband – forced to resign. Nick Clegg – humiliated. Ed Balls – catastrophic defeat. Vince Cable – finished. Steve Webb – humbled. Gregg McClymont – destroyed.
On top of the heap of political career carcasses stands David Cameron. Master of all he surveys after delivering the first Conservative majority victory for 23 years.

The focus now turns to the Conservative manifesto and what personal finance goodies or nightmares it contains. But that’s wrong.

Sure, there are treats on inheritance tax for the family home and fiendishly complex proposals to cut pension tax relief. It also promises to increase the income tax personal allowance to £12,500 and the 40p threshold to £50,000 by 2020.

All important but a manifesto is nothing more than a dry set of ideas that a new Government will try to introduce. Some policies will happen, others will be quietly dropped. It gives us a flavour of the next five years but nowhere near the entire story.

What was the biggest political move on personal finance in the last parliament? Pension freedoms. Not in any manifesto.

Or what about the flat rate state pension, pensions charge cap or stamp duty reforms? Not one of them was in either the Conservative or Liberal Democrat manifestos in 2010. Nobody was even talking about it in 2010.

George Osborne didn’t even mention his shock pension reforms and stamp duty changes until the day he announced them.

That’s why it matters that Webb and McClymont have been gunned down by voters. For example, it was McClymont’s focus on charges that forced the Government into introducing a cap while Webb’s personal drive for pot follows member has ushered in an entirely new transfer system.

Anyone who says we should focus more on policy than personality in politics is wrong. Studying each parties’ manifestos before deciding how to vote is narrow-minded.

The personalities and preferences of ministers provide us with a much greater insight into how policy will shift and swerve in the next five years than pre-election policy pledges.

In personal finance, two individuals now matter more than anyone else - Chancellor George Osborne and pensions minister Ros Altmann.

In an era of super-low interest rates, Osborne has been driven to a radical savings policy and he has got a taste for it.

Reforms to Isas, pensions and savings taxes have won plaudits among middle earners and Osborne is likely to go further.

Get ready for more rabbits in hats in future Budgets. He could merge Isas and pensions to put his reforms on steroids. He could get the ball rolling on merging income tax and national insurance, echoing the major income tax reforms of his political hero, Nigel Lawson.

Meanwhile Altmann’s campaigning work has focused on failed workplace pension schemes and a broken annuity market.

Will she continue to champion them by pressuring the FCA in to annuity action or raising the Pension Protection Fund levy to help those hit by bankrupt company schemes? Or will she move on to new areas such as a drawdown charge cap?

Examining the characters of Osborne and Altmann - and the shadow pensions minister, if they are as engaged as McClymont - is the greatest insight into pensions policy for the next half-decade.

They can shape the national debate on pensions like no one else and will do. It is an enormous power and one that will change attitudes as well as laws.

Their whims and preferences; mistakes and triumphs will do more to shape financial planning in the next five years than almost anything else. Forget the manifestos and look at the politicians.