Hats off to Rachel Mortimer and Jack Simpson of the Times, who have been digging in advance of Rachel Reeves announcement on phase 2 of the Government’s pension review. Pension 1 is the Pension Schemes Bill, stage 2 sounds like a consultation which is not quite so certain!
The feeling is that Reeves will announce phase 2 of pension reforms tomorrow (Monday 21st)
The photo shows the elderly Times reader bearing the cost of pension reform.
There are lots of ways the elderly can do this including paying national insurance on pension income (to pay for their burden on NHS on a hypothesised basis). Or they could expect a lower increase on state pensions (losing triple lock ).
This is something this Government has pledged to keep in place – for the duration of this parliament itself. Of course the wealthy will lose in a couple of years, the perk of protecting the estate by keeping unspent pension payments from inheritance tax – that’s going unless we have a very unlikely u-turn (mark III).
These are means to make the state pension more affordable but the cost of winter fuel payments has been returned to HMRC and the welfare squeeze by DWP will no longer be happening and this means that the elderly have so far survived untouched (well while alive).
If the announcement is tomorrow (Monday) then let’s weigh up in our minds whether the state’s increasing support of the poor pensioner (through the state pension and benefits) can be afforded without a balancing burden to the richer pensioner.
More pressure to get private pensions taking the strain
In 1998 I helped Ben Jupp write a pamphlet called Reasonable Force for Demos, it was endorsed by Frank Field, my link to it is broken but I can remember that Jupp’s argument was that Government has a responsibility to make sure people have enough income throughout their later lives to keep them “off the State” and that people should be required to save to get to this level of income. It was a Blairite argument and was taken up by Frank Field, maybe it had some impact on Turner’s reports.
When the pamphlet was written (some 27 years ago) it cost about £100,000 to buy a pension of £10,000, now it costs about £2o0,000. This is because we now recognise people will be living longer and that relatively low-inflation/interest rates are likely to be maintained. In my view, it is this increased cost of buying a lifetime income that is making pensions so unpopular (hardly the fault of pensions).
So long as we consider pensions as a means of insuring against living too long and dying in destitution, then it’s hard to see pensions dying out! But so long as private pensions demand people tie up their retirement savings in pensions or annuities, pensions will be seen as a tax. That’s why Nest’s solution – to offer DC pensions an escape route so those in payment can swap pension for pot – is a winner. It could make pension reforms we’re seeing from the Pension Schemes Bill acceptable to the public and allow the Government explain that workplace pensions, on top of the state pension , are lifting 30 million out of pension poverty (make up the numbers to suit). The Pension Schemes Bill is a winner, phase 2 is going to lead to consultations and deferral to another Government.
The Times runs a poll (only 119 votes so far) but it suggests that Times Readers want to see higher contributions into private pensions. Ben Jupp would be happy – he wanted as “Reasonable Force” to mandate contribution levels necessary to keep us all off of benefits (pension credits were on their way). I suspect that if you asked that question of low earners , they would not be happy with more pension tax. Old codgers want private pensions to leave them alone – “the young can pick up the bill” says the Times Reader.
I don’t want to enforce poor people to pay more into workplace pensions (as you can see). I bet there is a strong undercurrent of thinking among Times readers that the poor are getting a free ride and shouldn’t.
It is perhaps the big decision for Reeves as she has the albatross of the 2017 AE promise around her neck. It was supposed to be in place requiring higher contributions on all earnings but especially on the poor
I think I read it 8 years ago, here is the document (link here)
The only thing popular with the public was that the May Government had kicked the problem 8 years down the road, it won’t be any more popular today.
The poor are not going to pay the price of getting everyone on adequate incomes, the price will be paid by someone (a popular phrase with Government right now) and my guess is that it will fall on those who pay tax and insurance (the workers) and tax but no national insurance (the pensioners). If I was Reeves, I’d use the stealth tax – national insurance – it could be hit within this Government but perhaps not just yet!
If Reeves has any sense, she’ll fill tomorrow’s phase 2 plan up with ideas and consultations and allow the tough decisions to be taken in another 8 years. She reminds me a lot of May.
