Pensions minister Steve Webb and shadow pensions secretary Rachel Reeves exchange blows in the fight for votes at the May general election, and set out their policies on saving for retirement
STEVE WEBB, Liberal Democrat minister of state for pensions
For many years, the role of pensions minister was something of a revolving door. With ten different ministers in thirteen years up to 2010, it was no wonder that pensions policy showed little stability or direction, and the system had become so complex and inefficient.
Under the coalition, that has changed dramatically. Having a single pensions minister with a clear vision for reform has meant that the pensions landscape is unrecognisable from the situation five years ago. We have taken radical action which has shaken up the industry, put the interests of the consumer first and laid the foundations for a fairer, more sustainable system.
The new state pension is at the heart of our reform programme. Coming in from April 2016, this will give people clarity about the income they can expect in retirement and a solid base upon which to build further saving.
It abolishes inequalities which have affected women, the low paid and the self-employed for decades, and will drastically reduce the means-testing of pensioners.
Alongside this, we have successfully implemented automatic enrolment into workplace pensions. In just two years, around five million people have been automatically enrolled, with opt out rates lower than all expectations, and a further five million will be enrolled in the coming two to three years. Most encouraging of all, it is the youngest workers who have been the most likely to stay in.
But incredibly, the last government planned for automatic enrolment with no minimum quality standards on schemes to protect consumers and no limits on charges.
We will need to do more to get workers saving more, beyond the statutory minimum of 8 per cent of their wage, from the middle of the next parliament
By contrast, we are ending rip-off fees – imposing a 0.75 per cent cap for the default funds of all qualifying schemes – and banning hidden costs, helping people build up the best retirement income possible from their savings.
New transparency measures will allow employers and employees to see exactly what they are paying for, compare across the market and make informed decisions when choosing pension schemes.
We are also legislating to encourage innovation in the pensions industry and to develop products that provide a better balance of risk between workers and employers.
As a Liberal, I have long objected to the notion that the state knows best what people should do with their own money. So in one of our boldest reforms, from April 2015 we are removing the requirement on individuals to turn their defined contribution savings into annuities when they retire. We’ve also committed to the provision of free guidance to help people make those significant decisions.
Looking forward, there is still more to do. In my view the system of pensions tax relief needs to be made fairer, with ordinary workers getting a fairer share of the tens of billions of pounds a year that we spend on tax relief. We will also need to do more to get workers saving more, beyond the statutory minimum of 8 per cent of their wage, from the middle of the next parliament.
But I firmly believe that what we have achieved in the last five years has been little short of a revolution in pensions and one which is attracting attention around the world.
RACHEL REEVES, Labour shadow secretary of state for work and pensions
Retirement should be something that everyone can look forward to. But too many people face the prospect of retiring with little or no savings, and many of today’s pensioners are being hit by the cost-of-living crisis that has seen bills and other household costs rise.
Labour will always back people who do the right thing, work hard and save for their retirement. A Labour government will take action in six areas to ensure people can retire on a decent standard of living.
First, we will tackle the cost-of-living crisis which is making life harder for millions of pensioners and savers. Labour will freeze gas and electricity bills until 2017, raise the national minimum wage to £8 an hour, extend free childcare for working parents, and introduce a lower 10p starting rate of tax to cut taxes for 24 million working people on middle and lower incomes. These measures will help people to earn more and save more for their retirement and pensioners to enjoy a better standard of living.
We will act to protect up to 320,000 savers from the threat of rip-off charges on new pension products which will replace annuities next year
Second, we need to ensure that more people can benefit from auto-enrolment. The Pensions Commission, established by the last Labour government, set out a plan to help more people save into a workplace pension. But the government has excluded 1.5 million people on low incomes, including more than a million women. Labour is considering proposals to ensure more people can benefit from auto-enrolment.
We also need to do more to ensure that the nearly five million self-employed workers in the economy have fair access to savings. It’s concerning that less than a third are currently saving into a pension, so we’re currently studying what we can do to improve their prospects of a decent retirement.
Next, we need to ensure that the money people put aside in pension schemes is working as hard as possible to deliver them a decent income in retirement. We need to make sure that the new pensions freedoms and flexibilities work for savers. So we will act to protect up to 320,000 savers from the threat of rip-off charges on new pension products which will replace annuities next year.
Finally, it must be our goal that no pensioner faces retirement in poverty. Pensioner poverty fell significantly under the last Labour government thanks to measure such as the pension credit and, by establishing the Pensions Commission, we laid the ground for the new single-tier pension. Labour will preserve the triple lock for the basic state pension to ensure that pensioners’ incomes keep pace with the cost of living.
Getting more people to save for their retirement is good for everyone: savers and pensioners, businesses and taxpayers. Getting more people to save today will help control the benefits bill for future generations. But under the Tories, the amount the country saves is set to fall over the next five years, threatening the quality of retirement for millions of pensioners and higher welfare bills for taxpayers.
The measures I have set out will help more people to save and more people to enjoy a decent standard of living, ensuring retirement is something to look forward to, not something to fear.