Gov’t must not water down pensions reforms

The delay to the pensions White Paper, which would detail a radical overhaul of the state pension system, led to a story in one newspaper last week suggesting that David Cameron had personally intervened to block it.

We were told that he fears the reforms could alienate core Conservative ‘grey’ voters. It now seems the story was without foundation.

But it does seem that a battle is being fought between the department for work and pensions, which wants to press ahead with the reforms as planned, and the Treasury which is trying to restrict costs by all possible means.

And there are also political concerns that only new pensioners will benefit from the proposed £140 a week basic pension while existing ones will have to grapple with the current system.

This is a legitimate worry but with any radical overhaul there has to be a cut-off point. And such cliff edges have not put governments off other reforms such as raising the state pension and private pension ages or abandoning the married couples’ allowance.

There have also been spurious suggestions that higher earners could lose out from these reforms because of the loss of the state second pension.

As you will know, the previous government had already set reforms in train that make the state second pension increasingly unattractive to higher earners – and benefits already earned are to be ring-fenced.

Let us be clear though. These reforms are essential and any watering down of the proposals would be a ghastly error.

Steve Webb, the pensions minister, has devised a way of sweeping away a system that has been bolted together over the past century. Along the way politicians have added a bit here, taken away a bit there and generally created an expensive, incomprehensible mess.

The current system punishes those that save while not doing enough to protect those that cannot.

The means-tested elements are often left unclaimed by those that need them the most.

We have a once in a generation opportunity to introduce radical reforms that will deliver a fairer, affordable and less complex system.

No politician or civil servant has the right to squander this opportunity because of a lack of courage, foresight or in search of short-term political gain.

_------------------------------------------------------------------------------------------------------

Room for abuse

I have been a staunch supporter of building societies for my whole career. But I have never been convinced that they have served their members well when it comes to investments.

Now in a paper called The Future of Building Societies, the Building Societies Association is arguing in favour of structured products because they have been popular with customers.