Social care is more of a concern for tax payers than potentially having to foot the bill to fund the retirement of people who blow their savings,Steve Webb has claimed.
The pensions minister said: “The vast people we are talking about will have a pension pot which will keep them clear of pension credits, we are abolishing the saving credits, most do not rent so they will not get housing benefit and very few will be poor enough unless they really go mad to get help with their council tax.”
Speaking at a panel event in London that looked at funding retirement and hosted by My Financial Services, a new events-led forum for the industry, Mr Webb said the only real exposure for the tax payer was social care, which he said “would be a problem 20 years hence.
“For those people, whether they blow a £30,000 pension pot and do not have £30 a week, it will not make a difference to whether they can afford £700 a week social care.
“In the grand scheme of things, if people do more pension saving, and with pension being popular we think they will, the taxpayer might even benefit.”
Mr Webb said that those who frugally put beyond the minimum aside for retirement were generally not the same as a person who goes crazy at retirement.
He said: “I’m not saying that nobody will do this but according to our estimates it is a tiny issue and the big price is freedom.”
Neil Lovatt, director of Scottish Friendly, suggested making the pensions freedom conditional with a minimum income so that people would not need to be means tested, which he said would make sure they would not be a burden on the tax payer.
Steve Bee, chief executive of Jargonfree Benefits, said we now have a pension system that does right for people after so many years of failures by pension ministers to get it right.
Welcoming the pension freedoms as “finally doing right for people”, he said that we were very lucky that this day has arrived and that people could be trusted with their own money.
He said: “[Steve Webb] has done a great job, we have finally got changes we need, a subsistence level pension and above that we can build our own pension if we want to, people can build their own world, and the state and private pension are no longer intertwined.”
Stephanie Condra, retirement market strategist at Axa Investment Managers, said that a great deal of work needs to still be done to develop products that meet the needs of people facing retirement.
She said: “There are a lot of products out there that provide income but a lot needs to be done to develop products because income is a need but so is protection so there is room for growth and innovation.”