Steve Webb as Pensions Minister – Brilliant!
We could finally be in for proper pension reform
by Dr. Ros Altmann
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Something really exciting may be about to happen to UK pensions policy. At last, we may have real hope of remedying the dreadful damage of the past 13 years. I understand that Steve Webb has been appointed as the new Government’s Pensions Minister – what a great choice.
Steve has a detailed knowledge of pensions, having Shadowed the brief for over 5 years and he has developed sensible, radical policy proposals that could finally set us back on a sustainable path for the future. Given our demographics, it is vital that we deal with the pensions crisis as effectively and quickly as possible.
These are the kinds of radical reform that Steve Webb would be thinking of – and I would support them:
- Radical reform of State Pension – including a fair pension for women
- End mass means-testing for pensioners
- Review NESTs to address levelling down
- End contracting out
- Early access to pensions
- Changes to higher rate tax relief
- Address public sector pensions
- Equitable Life compensation
Steve Webb has called for measures such as:
A Citizen’s Pension and fair treatment for women
He has been a tireless campaigner for a fair state pension for women, who are penalised by the current national insurance system. He has helped thousands of women achieve a better state pension – reform of women’s pensions would be brilliant. So far we have had tinkering and tweaking to our old-fashioned system, but the time has come for a new approach
He is in favour of a Citizen’s Pension, which would form a stable state pension base, on which private pensions could be built safely – without fear of means testing penalties. This would be a fantastic reform. It may only be affordable from a later age, but that would still be a huge improvement.
He has long warned about the dangers of mass means-testing in our state pension system. He understands the disincentives this poses and has talked about the people who complain to him how they wish they had not bothered saving, because their neighbours who did not save end up with extra money from the state. A citizen’s pension would get over the problem of mass-means-testing. Then, at last, pensions could be a suitable product for most people.
NESTs and auto-enrolment
Steve has warned about the dangers of NESTs and he is absolutely right. If we auto-enrol people into a system and then they lose much or all their pension on retirement, the Government would be open to challenge. If the citizen’s pension is introduced, NESTs become safer, but he has also rightly warned about the risks of levelling down and would like to see the employer contribution requirements increased. This would be more controversial, but is certainly an important issue to consider.
Steve Webb recently said he was in favour of getting rid of contracting out of the state second pension. I entirely agree with him. The sooner we end contracting out the better and, by doing so, the Government will save many billions of pounds each year, as it collects higher national insurance contributions. The main beneficiary of contracting out are workers in unfunded public sector pension schemes, who pay too low a rate of national insurance, but still have to be paid their second pension by taxpayers in future anyway.
He is in favour of allowing people to take some money out of their pension funds – perhaps at least their 25% tax free lump sum, at younger ages, which would make pensions more flexible and attractive, especially to younger savers
Tax relief for pensions
Steve Webb is in favour of ending higher rate tax relief for pensions. This will be more controversial and it may not be acceptable to the Tories, however if there is a much better state pension system it may that some reform of tax relief goes through. Certainly, we do need to undo the dreadful changes that were made in the last two Labour Budgets, which have left the system in an almighty mess. The rules for people earning over £130,000 are virtually incomprehensible and will only hurt, not help, pension provision.
Public sector pensions
I believe Steve Webb is in favour of ensuring that the public sector pension system works more fairly and transparently. That would be most welcome!!
Compensation and Equitable Life
Steve Webb has been instrumental in calling for and persuading others of the case for compensating victims of the terrible pension scandals for which Government has responsibility. Steve Webb committed the LiberalDemocrats to compensating victims of failed company pension schemes as soon as he recognised the problems. He has also been urging Government to accept the verdict of the Parliamentary Ombudsman on both that case and the Equitable Life scandal. I am sure that the victims of Equitable Life will finally be paid some compensation, after Labour left them dangling for years with disgraceful delaying tactics.
All in all, he has a huge in-tray of issues, We are likely to have some Commissions and Reviews that will sort out the detail, but I am more hopeful than I have been for years that we may be heading for real and positive change to set us on a sustainable pensions path at last.
Dr. Ros Altmann