Steve Webb

I have thought of saving for retirement as saving for the best time of my life when I have time to enjoy the things I always wanted to do.

But now my worry is that my health won’t hold out and I will become a liability to my family. If you told me that I would be joining a scheme which ensured there was money to pay the bills if my health went wrong, I wouldn’t say no. Not unless the amounts asked for were unreasonable. This voluntary taxation could be extended to meet the costs of those who did not hit the minimum earnings in retirement (as it is for social care today)

I say this because I was pleased to see Steve Webb proposing the idea in the FT today. You can read more about it in this link to LCP.COM

When the social care question was highlighted in Andy Burnham’s speech to the Labour Conference, Steve Webb and Andy Young (his old partner in organising the state pension) told each other Burnham wasn’t saving enough from his cramping the triple lock to meet an ambitious social care plan (to be introduced towards the end of next decade).

I sense in reading this that the IFS in Steve Webb had been tickled and we would hear more of him now he’s a consultant at LCP. A couple of weeks later and the former pensions minister who oversaw the introduction of Auto Enrolment is back nudging a solution.

It rehearses his concern and nudges us towards a health insurance version of what has worked for retirement saving.

This is handily timed to land on our phones as many of us travel up to Liverpool for the Pensions UK conference.

This is what I am happy to pay if it returns me a degree of security and I suspect I would have been equally as happy when I was 40. I would not sign up to it , but I wouldn’t opt out of it if I was automatically enrolled. But how can people like me get enrolled?

To understand the administration of the system, I need to turn to the 49 page proposal from LCP and  pages 27/8.

I know that this will excite the administration question in us practical pension people! The key word is “HMRC”, this would be done through taxation and so be our first opt-out tax.

I will look forward to reading the full report later in the week and reporting on it. It looks immediately right, because this is a collective solution that doesn’t involve the private sector in another major job (we in pensions have enough to do).

It may not please those who see the solution to this and everything in a 12% payment into workplace saving plans. But it makes a lot of sense for pensioners and those too young to get paid a pension but who know that social care is a problem if not for them for older people that they know,

Steve Webb finishes the practical section of the report by admitting that his numbers are based on an unpractical proposal

For simplicity we have assumed that the new contributions would start flowing next year (2027-28) and the first people would start benefiting from savings in 2028-29, but in practice it wouldbe likely to take longer than this, both to complete the necessary legislation and regulations andto set up the required administrative infrastructure.

But  the insurance’s implementation is urgent enough to get us thinking of something in advance of the social care package arriving.

I suspect that Steve Webb will be having a conversation with Baroness Casey to help her with her commission on adult social care.