Mills

Politicians not doing enough says consultant

The Government must not delay its planned overhaul of the State pension scheme, says Tim Mills, Senior Consultant at Tunbridge Wells-based employee benefit consultancy Brunning Newman Houghton Limited (BNH).

He said politicians have become reticent about a subject which is of great importance to almost evertyone in Britain.

Mr Mills said: “I cannot help but notice that the politicians have gone strangely quiet on the pension front since the Department for Work and Pensions’ dramatic announcement in April 2011 when it wheeled out proposals for an overhaul of the current State pension system entitled: ‘A State Pension for the 21st century’.

“At that stage the momentum for reform, which was headlining a single State pension of between £140-150 a week, seemed unstoppable. The logic was irrefutable. Promise everyone a decent state pension, scrap the confusing state second pension and make it clear there would be no more pension credit or top-ups of any kind.

“This would then signify the end to means testing, which some pensioners find humiliating or incomprehensible (or both!). As a result, and most importantly, those who saved privately or with their employer would be rewarded rather than punished for their thrift.

“In the intervening period the deathly silence on the issue suggests it is in danger of being kicked into the political long grass as perhaps too difficult or too controversial. We have heard some self-interested comments from representatives of the public sector pension schemes where these changes might reduce members’ take-home pay by around one per cent, which would presumably cause some (more!) industrial unrest.

“Inevitably this proposed change to the system would produce some winners and losers. For example, the current generation of pensioners will not be included but, if they were, it would make the whole scheme too expensive. It is regrettable that the Government cannot make these changes for all but I do not believe that should stop legislation being put in place which will bring about reform in the medium term.

“I think Pensions Minister Steve Webb summed the issues up perfectly in April 2011, saying: ‘The complexity of the current state pension system is a major barrier to saving’ The pensions industry knows it and instinctively most consumers know it because most do not have a clue what their retirement income will be.

“I also feel Joanne Segars, chief executive of the National Association of Pension Funds was right when she said: ‘A simpler, more generous state pension is a win-win that could lift millions out of poverty without hitting the taxpayer’s pocket. Those who are disadvantaged by the current system, like women and the self-employed, will be better off.

“‘A revamped state pension would enable everyone to see that there is a clear foundation for their retirement, and that it pays to save. They can then build on this through their own pension and savings’.

“From my standpoint the proposed changes to State pensions should be integral to the forthcoming Workplace Pension Reform (WPR) legislation commencing later this year. Without it, advisers will have to be careful to check whether an individual will benefit or not from being auto-enrolled into their employers’ pension scheme.”