Tony Hazell: Why is government pensions reform stalling?

It has gone strangely quiet on the pensions front as far as politicians are concerned. And I am not talking about their refusal to reform their own lavish retirement packages.

When the department for work and pensions wheeled out proposals for a new basic stake pension last April they were hailed as: “A state pension for the 21st century”. And so it seemed.

At that stage the momentum for reform leading to a basic pension of £140 to £155 a week seemed unstoppable.

The logic of the plans was irrefutable. Promise everyone a decent liveable basic state pension, scrub the confusing state second pension and make it clear there would be no more top-ups.

It would eventually mean an end to means testing, which some pensioners find humiliating or incomprehensible and spell the slow death of the pension credit.

Those who saved privately would be rewarded rather than punished for their thrift.

But in the 10 months since then the silence on the issue suggests it is in danger of being kicked into the political long grass as too difficult or too controversial.

Inevitably any changes mean there would be winners and losers. The current generation of pensioners were upset at their exclusion from the proposals, but including them would make the whole scheme too expensive.

It is regrettable that we cannot wave a magic wand and reclaim our lost billions from the banks to make the scheme affordable to all. But that should not stop legislation being put in place which will bring about reform in the medium term.

Pensions minister Steve Webb summed the issues up perfectly in his foreword to last April’s consultation paper: “The complexity of the current state pension is a major barrier to saving”.

The industry knows it and instinctively most consumers know it because most do not have a clue what they will be receive at retirement.

The industry also understands that there is a great deal of money to be made from reforms that will make it clear where the consumer stands and place the onus on them to save if they want a more secure future.

With so many potential winners in the long term we must wonder why the government seems so reluctant to press ahead with this sensible and vital reform.

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No tears for FSA

You do have to wonder precisely what the many employees of the FSA were doing at some periods in the early part of the century, other than gazing at their navels.

Perhaps they were contemplating the lyrics of the Bob Dylan’s Positively 4th Street which adorn their atrium.

‘You say I let you down, you know it’s not like that,’ sums up their attitude to investors and taxpayers let down by their, at times, lackadaisical attitude to regulation.

Andrew Tyrie, the chairman of the Treasury select committee, last week accused the FSA of being “asleep on the job” in relation to its review of the Royal Bank of Scotland, saying that the regulator failed to properly assess prudential issues the bank’s failure raised.