The Fowler Inquiry into Provision for Retirement and the Pension Reforms of 1986

On 6 December 2017, the University of Bristol’s Thatcher’s Pension Reforms research project in association with the Institute and Faculty of Actuaries held a very well-attended ‘witness seminar’ in front of an invited audience at Staple Inn, London at which Sir Nicholas Montagu, Chris Daykin, Sir Adam Ridley and Marshall Field discussed the the Fowler Inquiry into Provision for Retirement and its relationship to the Conservative government’s landmark reforms to British pensions in 1986. The session was chaired by Gregg McClymont, introduced by Colin Wilson, the immediate past President of the IFoA, and began with a paper by Professor Hugh Pemberton (University of Bristol).

A video of the evening’s proceedings is available (the seminar begins 20 minutes in, after the introductory paper, and the subsequent question and answer session begins 1hr and 22.5 minutes in.

A full transcript of the witness seminar and the subsequent question and answer session is also available.

You can also read the text of Hugh Pemberton’s introductory paper.

Thatcher’s Pension Reforms – Witness Seminar, 6 Dec 2017

The Thatcher’s Pension Reforms project is very pleased to announce a witness seminar to be held on 6 December in association with the Institute and Faculty of ActuariesArts and Humanities Research Council, and the University of Bristol.

The Fowler Inquiry and the Pension Reforms of 1986

Staple Inn, High Holborn, London, 6 December 2017 from 5.30 pm to 7.30 pm. Registration (with refreshments) from 5 pm. Buffet supper 7.30-8.30 pm.
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Chris Daykin
Marshall Field
Lord Fowler
Sir Nicholas Montagu
Sir Adam Ridley

Chair: Gregg McClymont, Head of Retirement Savings, Aberdeen Asset Management.


If you wish to attend the conference please register here

Background briefings

Two briefings are available:

  1. A short (2-page) summary of the Inquiry and the ensuing reforms, with key questions.
  2. A longer (16-page) background briefing setting out the context to the Inquiry and the reforms and outlining some key developments in the development of policy.

Women Against State Pensions Inequality – some history

Women Against State Pensions Inequality (‘WASPI’) are using the general election to wage a very successful campaign pressuring candidates to sign the ‘WASPI pledge’ to support compensation for women born in the 1950s who find that their state pension age is not 60, as many had expected. But though WASPI complains about the short notice of the increase in pension age for this generation of women, it has been a long time in the making. Hugh Pemberton has written a background piece for the History and Policy website which traces the long history of equalisation. That history goes back to the late-1970s (when Barbara Castle was put off by the staggering cost of equalising downwards to age 60) and the early-80 (when Margaret Thatcher was warned that it was an awful lot easier to give a benefit to someone than to take it away). Legislation finally came in 1995, but history indicates that it was both understood as a step towards gender equality and much more publicly discussed than WASPI alleges.

Josephine Cumbo joins project board

We are pleased to report that Josephine Cumbo, Pensions correspondent of the Financial Times, has joined the advisory board of the Thatcher’s Pension Reforms project.

In 2015 Josephine was the Society of Pensions Professional’s ‘journalist of the year’ for the second year in succession and also won the ‘Personal Finance Education Award’ at the 2015 Santander Personal Finance Media awards (for her investigations into the lack of transparency in the drawdown market — the fastest growing area of the market following April’s pensions freedoms — plus her campaigning work on inequalities in the new state pension). She was also awarded ‘Financial Journalist of the Year’ and ‘Personal Finance Journalist of the Year’ by the Association of British Insurers in 2014 and 2012 respectively.  In addition to reporting, Josephine is also involved in the FT pension plan’s governance committee as a member representative.

Thatcher’s Pension Reforms: Latest findings

We are now about 15 months into the project which, following the recent retirement of Roger Middleton and replacement as co-investigator by Dr James Freeman, will now continue until July 2018. Since our last progress report we have found and examined a huge range of documentary material relevant to the pension reforms of the 1980s. We are in the process of making sense of all these documents but here are some highlights of our recent findings:

  • Portable personal pensions embodied an assault not just on the State Earnings Related Pension (SERPS) but on occupational schemes and insurers.
  • Occupational pensions had traditionally been viewed with approval by Conservatives but were viewed by the ‘new right’ as paternalistic and antithetical to individual freedom.
  • The actuarial profession was highly concerned about the government’s proposals to abolish SERPS – warning that the public lacked the necessary financial planning skills and would be at risk of misselling.
  • The actuarial profession resented the way in which its views were ignored.
  • The Government Actuary’s Department was pushed to the limit of its preparedness to cooperate in the process of change, often disagreeing with the assumptions on which it was asked to make projections.

More details can be found in AHRC TPR Project Briefing Note 3.

New investigator joins Thatcher’s Pensions Reforms project

Photo of JamesIn September, and with great sorrow, we said goodbye to Professor Roger Middleton, the project’s co-investigator, as a result of his retirement. We are pleased to report that the Arts and Humanities Research Council has confirmed the appointment of Dr James Freeman as his replacement. James is Lecturer in Digital Humanities in the Department of History at the University of Bristol. He brings to the project his expertise in the changing nature of political rhetoric in postwar Britain and his skills in data analysis and visualisation.

This change in personnel has also led to an adjustment of the project’s end date – which is now scheduled for the end of July 2018.

A history lesson for the Treasury

What are the lessons of history for the Treasury’s proposals to change the basis of UK pension taxation? The experience of the 1980s signals trouble ahead for both consumers and the state if the changes are implemented.



In its July consultation paper (Strengthening the incentive to save) HM Treasury outlined its plans to change the basis of UK pension taxation. It proposes to abolish the present system in which people saving for a pension are given tax relief on their contributions but the pension, when it is eventually taken, is taxable. Instead the Treasury proposes to tax contributions but for the pension in payment to be tax free. (Thus moving to a so-called Exempt-Exempt-Taxed or EET system to a Taxed-Exempt-Exempt, or TEE, system). In the Treasury’s view this will simplify the system, increase incentives to save and boost tax revenues.

But history suggest the proposed change is unlikely to achieve its professed long-term aims. Instead it is likely to reduce tax receipts, result in lower pensions for consumers, complicate the system, and decrease saving (in turn producing pressure for higher state spending).  The short- to medium-term tax revenue gained by the shift will be vastly outweighed by the long-term costs to the state and to individuals.

Anybody familiar modern British political history will know there is a consistent pattern of short-termist political decision-making that turns out to have unwelcome long-term consequences. Of all areas of policy, pensions are the most long-term and the proposals set out by the Treasury risk repeating such mistakes.

For an example from history, take one of the changes being examined by the AHRC’s Thatcher’s Pension Reforms project: the then Conservative government’s decision in 1980 to link increases in state pensions to the rise in retail prices instead of the rise in average earnings. This alteration, made entirely for reasons of short-term economy, looked small at the time but over the long-term the change, compounded annually, served to slash the value of the state pension from an already meagre 26% of average earnings in 1979 to just 16% within 20 years.

The present proposals will have similar long-term consequences.

  1. The loss of tax relief will remove an important incentive for people to save into their pension and so we can expect levels of pension saving to fall.
  2. Because contributors will lose the capital growth on the value by which the tax relief raises their contributions their final pension pot will be smaller.
  3. Receiving the pension tax free will probably not make up for this shortfall. On reasonable assumptions, a 25-year old today will find their pension will be 7% lower.
  4. Over the long-term the initial revenue gained by initial tax relief on contributions will be significantly less than the tax revenue lost by paying the pension tax free (in our modelled example the total tax taken from this individual drops from nearly £40,000 to just £8,600).
  5. Finally, the promise of simplification held out by the Treasury consultation document is an illusion. Like virtually every change to the UK system since 1945 implementation of this proposal would complicate not simplify the system – because pension contributions pre-dating the proposed tax reform will continue to yield a taxable pension and so there will actually be two parallel tax regimes.

We conclude that the Treasury’s consultation documents is an attempt to dress up a policy aimed at bolstering tax revenues over the short- to medium-term as a long-term reform to incentivise pension saving and improve the level of income replacement in old age. It is inconceivable that it will achieve either long-term aim.

We recommend that government should look to the long-term security of British pensioners and resist the temptations of a short-term boost to public finances from abolishing tax relief on pensions. If the Treasury is determined to reduce the cost of tax relief on pension contributions it should instead consider removing higher-rate relief, a costly subsidy to those least in need of an incentive to save into a pension.

Read the full version of our response to the Treasury consultation.

Journalists, policy-makers, etc. please contact Dr Hugh Pemberton if you want a further briefing.

Gregg McClymont joins advisory board

‘Thatcher’s Pension Reforms and their Consequences’, an AHRC’s research project, is very pleased to announce that Gregg McClymont, formerly Labour’s shadow pension minister from 2011-15, has joined its advisory board. Gregg is head of retirement savings at Aberdeen Asset Management, a role that encompasses defined contribution pensions strategy, research and implementation. Before taking up that role he was Labour MP for Cumbernauld, Kilsyth and Kirkintilloch East from 2010 to 2015 . He is also a modern British historian, having taken his PhD and taught at the University of Oxford and written a number of publications in the field.