Reinvigorating retirement
A speech by Steve Webb MP, Minister for Pensions.
Introduction
Thank you Iain.
It is an exciting time to be appointed Minister for Pensions.
Having done some research I found out I’ve had 10 predecessors in the last 13 years. So I have a personal interest in issues of longevity.
We are at the beginning of a coalition government, the first in over 60 years. This gives us an opportunity to look at the big picture.
Not to get trapped making incremental changes, but to take a long term view of where we want to go.
We have the opportunity to make changes that will transform the pensions landscape. Bringing millions of people into saving for the first time. Including those who the system has always missed out such as women and the lower paid.
This comes after a decade of wild spending and unsustainable borrowing.
We need to reinvent a culture of savings. A culture where people take responsibility for saving for their future, building on what they get from the state.
So let me tell you a bit more about how we’re going to do this.
Automatic-enrolment
Our plans to reinvigorate pension saving are underpinned by automatic-enrolment into workplace pensions, which we remain fully committed to.
Too many people do not have any form of occupational pension. Millions of people are missing out on pension saving and that cannot be right.
We want to build a system that is going to last for decades. So taking a few months over the summer to make sure we get this right is time well spent.
Automatic-enrolment review
Automatic-enrolment is a significant policy. And we need to make sure that it is implemented in an affordable, effective and successful way.
That is why we are launching a speedy but thorough independent review into making automatic-enrolment work.
I am happy today to be able to announce the team that will lead the review.
- It will be headed by Paul Johnson: a senior associate at Frontier Economics and a Research Fellow at the Institute for Fiscal Studies.
He will be joined by:
- David Yeandle; Head of Employment Policy at the EEF, the manufacturers’ organisation; and
- Adrian Boulding; an Actuary with 30 years experience in retirement provision and Pensions Strategy Director at Legal & General.
The team has been chosen because of their expertise. In the course of the review they will also get out and about, speaking to other groups and individuals.
This will include many of you here today and I thank you in anticipation for your help with this.
The review team has been asked to find the best way of increasing private pension saving. And getting the best balance between costs and benefits to individuals and employers.
This is a review about making automatic-enrolment work. Making it work for employees and for employers.
It may be that the current scope for automatic-enrolment is the best way of achieving this. Or it may be that changes need to be made.
Either way, we will listen to what the independent review finds out, and act on it.
The review will need to consider how different types of employees and firms should be covered by automatic-enrolment.
And it will look at the role of NEST.
We need to know how quickly any reforms will tackle pensioner poverty.
I was recently told “Well Minister, of course the 1970s reforms are just bedding in”. So it is important that reforms will have impact quickly.
Included in the review team’s Terms of Reference is a particular challenge to look at the impact on women pensioners. A group I have long worked for, and who are so often the poor relations in regard to pensions.
We are talking here today at the EEF. We take seriously the impact of automatic-enrolment on employers, and want to minimise burdens on them.
And of course, in this fiscal climate, a central concern has to be maximising value for money for the Exchequer.
The independent team will report its findings in September, and I look forward to seeing these.
Private pensions
The new Government is already moving forward quickly on a number of the commitments made relating to private pensions.
We said we would end the requirement to buy an annuity at 75. We believe that we should treat people as adults, and give them more flexibility and choice over what they do with their own money.
Our colleagues at the Treasury have announced an increase to age 77 to give time to consult and legislate on the details of this change.
The Treasury will also examine a more streamlined regime for pensions tax relief, acting on representations made by many of you here today.
State Pension age: call for evidence
I have become known as something of a bore at pensions conferences, as my answer to almost any question is “we need to get the state pension right”.
Today we are launching a call for evidence to inform our internal review on when to increase the State Pension age to 66.
No specific date for the change has been set. But we are committed to this not being sooner than 2016 for men and 2020 for women.
We want everyone who has relevant information about how to time this important change to tell us what factors we should be thinking about.
The increase is needed to reflect the realities of our ageing society and to help fund a decent, fair and affordable state pension.
And we know we need to move quickly on legislating for this increase, to give those who will be affected as much notice as possible.
State Pension age: beyond 66
In the longer term, as the Secretary of State has said, we want to consider a more systematic approach to the State Pension age.
Instead of ad hoc changes we need a long term approach that reflects issues like changing longevity and other factors as well.
This is not an issue only facing the UK. Around the world, countries are increasing their pension ages, often faster than we are.
Whatever changes we make, we need to do make them in a way that is fair. Fair across the generations. Fair between men and women. Fair between different social groups.
Our immediate priority is to get the increase to 66 right. We will then look at how and when we should move beyond that.
Conclusion
As we have shown today, now is not the time for fiddling around the edges of polices, but for setting in process some real reform.
And if we can’t do it now, at the start of this new Government, then I don’t know when we will.
And let me put on record how pleased I am to be working with a reforming Secretary of State who wants to make life fairer and simpler for people of working age and pension age. And I am proud to be part of this process.
We both look forward to working with you as we set these reforms in motion.