Pensions  

Webb tells MPs five-year plan needed for pensions

Webb tells MPs five-year plan needed for pensions

Pensions minister Steve Webb has said whoever holds his position after the General Election will need a five-year plan.

Addressing the work and pensions select committee, Mr Webb said this would prevent the reforms being changed through “the curse of incrementalism”.

The Liberal Democrat MP, who acknowledged that he might not be pensions minister after 7 May, said that whoever takes over the role will need to outline early on which issues he wanted to tackle.

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He said a scheduled statutory review in 2017 was now redundant because it would look at issues such as the transfer ban and contribution limits for the National Employment Savings Trust (Nest), but the ban on transfers and contribution limits will not exist by 2017.

He added: “We shouldn’t wait until the middle of the next parliament to have a review. That’s too late because if you have a review and then you consult and then you legislate we will be past the next election.

“My view is that my immediate successor should identify the big gaps and set out a five-year agenda so people know where you are going and you don’t get the curse of incrementalism.

“It is clear to me that getting beyond 8 per cent [for auto-enrolment minimum contribution levels] should be part of that. Tax relief and tackling scams and liberation would be key issues.”

As part of the automatic enrolment reforms, combined contributions from employees, employers and tax relief are expected to rise to a maximum of 8 per cent by October 2018.

Mr Webb said: “I favour auto-escalation but we need that conversation sooner rather than later.”

Auto-escalation would mean a person’s pension contributions would rise in line with rises in their pay.

The minister disputed the need for an independent standing commission on pensions to take the politics out of the area - as some witnesses to the committee have recently claimed.

Adviser view

Jamie Smith-Thompson, managing director at Kent-based Portal Financial, said: “Last year was one of the most significant years for pensions and we welcome the flexibilities that have been provided.

“However, since the reforms were announced we have received enquiries from a lot of people who are unsure what the changes mean for them.

“We are imploring the politicians not to make further pension reform part of their election manifesto as this will create further and unnecessary confusion with the majority of the general public.”