The pension changes announced at the Budget are explained quite well in the formal consultation document. I like the additional freedom being offered to pensioners. I don’t weep for the injuries to the annuities industry. But I’m worried about the short-termism that could be unleashed and the scope for new charlatans. It is no coincidence that behavioural economics is arguably most useful in pensions policy, when it helps to overcome inherent biases towards undervaluing our lifespans.
One aspect that has been neglected so far is social care – and this could end up being the test of the wisdom of the reforms. Paying for elderly care is one of biggest and fudged issues in public policy. Labour policy is that social care services should be merged with the NHS; thus it would be paid for out of taxation. When the opposition works out what it thinks of the proposed reforms, I’d expect it to talk a lot about social care.