Pensions 

Nice one, George!

I watched this week’s Budget speech on the BBC with pen and paper in hand making all the usual notes, ticking off all the well-leaked items as they came up, all the while checking on Twitter that I had not missed anything. A normal Budget Day really. Not boring – I actually quite enjoy the theatre of it; just normal, really.

And then the chancellor went off-piste. In just a few moments George Osborne introduced a pension revolution that seemed to come from nowhere. I have had hallucinations before; they are weirdly real. I wondered for a moment if I had just had another one.

But no, Twitter was full of astounded comments. I had heard it right. Pensions had suddenly become sexy – they will certainly become more popular, and what better time for us to get our pension mojo back than now with the implementation of auto-enrolment?

I did not realise when I had got my tea and biscuits ready earlier and settled down and turned the telly on that I was about to witness pension history being made. But it was and I was as surprised by it as everyone else. It is not too strong to call it a revolution either – the doing away with the need to annuitise defined contribution pension savings is truly revolutionary.

I was reminded later that day of the so-called ‘Battle of the Blogs’ that I had with a pensions minister in the Blair government when auto-enrolment was first being floated as an idea.

That long exchange of blog posts between us was reported in all the newspapers at the time and was christened the ‘Battle of the Blogs’ by the Guardian newspaper, which also exclusively published one of my blog responses to the minister before it was even published on my BeeHive page – a first for publishing I am sure.

I was against the idea because of the way in which entitlement to means-tested benefits could devalue people’s pension savings. The minister did not agree with my assessment and, to be honest, not many people in the pensions industry did then, either.

I was not very popular with the great and the good of the pensions industry in those days. At one august committee meeting I was even referred to as “a broken record” and asked if I realised what damage I might do to the pensions industry if I kept going on about the way means testing made pension saving absolutely pointless for so many people.

It was a subject that most people thought best brushed under the carpet. But it would have been wholly wrong to auto-enrol 13m employees into such a flawed pension system that could have put so many at risk of losing a catastrophic amount of value from their pension savings.

Over time the means-testing issue could not be hidden from view and it came to be recognised as the biggest problem in UK pensions.

The current coalition government made the historic move of scrapping our 50-year experiment with the state providing an earnings-linked second pension to half the workforce and improving the one resulting state pension to a level where means-testing will no longer be an issue.

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