Steve Webb, our Pension Minister had a good budget. For once it was the DWP that emerged as the progressive ministry, securing cabinet assent to the long-outed upgrade of the Basic State Pension to a universal benefit paying £140 per week while retaining proper indexation.
The ham-fisted attempt to simplify pensioner tax-relief was an own goal for the Treasury and a victory for the increasingly powerful pensioner lobby headed by the indomitable Ros Altmann. How Government officials could have expected the phasing out of age-allowance could slip under the radar is beyond me.
The general hysteria that followed , typified by #grannytax trending globally on twitter, was hilarious. I very much doubt more than one in a hundred of those who tweeted that tag had the faintest clue about what was being cut but this was where the collateral damage was done. Another little victory for social media with Treasury Mandarins looking as powerless as Middle Eastern potentates!
In the long-term, Webb has played an astute waiting game, showing plenty of political savvy. I am sure he is walking the corridors of Westminster with his cheeky smile and those of us who support not just the BSP upgrade but also his push to promote risk-sharing, should be sharing that grin.
Evidence of Steve’s rejuvenation seeped out from the PMI Conference where he jauntily returned to the theme of “aspirational” risk-sharing.
Thanks to Dan Billingham for this report of Steve Webb’s speech; the link gives the full report but here are some edited highlights.
Webb told the Pensions Management Institute‘s spring conference that the move will put into practice the kind of risk-sharing he wants to encourage as a middle way between defined benefit and defined contribution pensions.
The UK’s defined benefit schemes are increasingly closing their doors to new members and being replaced by less generous defined contribution plans.
Webb hopes that demand from employees can see the “pendulum will swing back”.
Webb said that employees are likely to question pension plans which give “no idea on the benefits you will get after saving all your life”.
Employers will likely need, however, to put aside their concerns to bear any financial risk of a corporate pension fund. He believes that “some firms will be happy to provide this certainty.”
One idea Webb offers is defined contribution plans that tell employees “if you work all your life you will get a pension worth between this and that amount.” Webb terms that “DC plus”.
Offering a minimum benefits level would see a company share the investment risk with employees saving into the plan.
Such minimum guarantees might reassure savers, and if at a modest enough level, spare companies the need to inject cash into the pension fund unless it has dire investment returns.
Tesco plans to allow members to still retire at 65 and draw benefits accrued to dat. It will though make future benefits accrue until 67 to reflect increasing life expectancy of its workers.
Webb said he wants to work on “creating a regulatory regime that allows 1000 flowers to bloom”.
Legislation that requires defined benefit plans to offer compulsory inflation increases and survivor’s benefits is seen by many as having prevented employers offering hybrid risk-sharing schemes.
Webb said “Why shouldn’t we say: ‘Great, get on with it!’ if an employer wants to provide a pension in addition to the state pension?”
Webb added that he is planning a “prawn cocktail offensive around Britain’s boardrooms to find out if there is any appetite for risk sharing”. He will also visit the Netherlands to see how risk-sharing works there.
He said the Department of Work and Pensions will then aim to publish documents on encouraging risk-sharing pension schemes later this year.
Webb was in good spirits after the announcement of a flat-rate state pension of £140 a week from 2016 in this week’s budget.
Many commentators credit Webb for getting the proposal adopted by the treasury. The minister is hoping that clarity in the state pension system can prove to be a solid foundation for reform of occupational pensions.
Now anyone who can talk of a “regulatory regime which allows 1000 flowers to bloom” has got to have been taking the happy pills.
DB minus, DC plus – aspirational , ambitious ,collective and mutual – may such pensions flower in my worktime!
Long live such regulatory regimes, long live Aspirational (popcorn) Pensions and lets hope that the spirit that drives our Minister’s ambitious agenda can suffuse the whole DWP, the Pension Regulator, Pension Protection Fund and by extension the bad boys at the Treasury.
- Aspirational pensions – popcorn pensions!! (henrytapper.com)
- Define your aspiration. (henrytapper.com)
- Pension Equality? Don’t make me laugh. (henrytapper.com)
- Can we have a word Mr Webb? (henrytapper.com)
- Whatever happened to “stakeholder economics”? (henrytapper.com)
- What’s in store for UK pensions in 2012? (henrytapper.com)
- Who pays for a register of pensions? (henrytapper.com)
- What have the Australians done for us – not much! (henrytapper.com)
- To get better pensions we need to share risk (henrytapper.com)
- Who made that choice for you? (henrytapper.com)
- Yes pensions minister (henrytapper.com)