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Issue of the day: Pensions
Party spokesmen debate their plans for pensions and older people.
Labour: Work and pensions secretary Alan Johnson
The issue of how we are going to balance work, saving and retirement over the coming decades is far too important for political point scoring. That's why this government’s approach - indeed, the only sensible approach - has been to move forward on the basis of all the facts.
But the question remains: how are we going to pay for pensions in the future when the demographic map of Britain is being completely redrawn?
This is not a 'Labour' problem or even a political problem. It's everyone’s problem and we will only be able to solve it collectively. This government made tackling today's pensioner poverty a priority: we will not shy away from doing whatever is necessary to help tomorrow's pensioners have an adequate income in retirement.
[W]e need to keep both the state and private sides of the pensions' equation in mind, which is why our next challenge will be to encourage today's pensioners for saving and to reward them for doing so.
Here too, we have made significant progress. The Pensions Bill... includes a range of reforms aimed at strengthening the pensions system and renewing people's confidence in it.
The bill encourages take-up of the measures already in place and the varied options available, and stresses the importance of providing people with sufficient information to make an informed choice on how to provide for their retirement.
We're also making it easier to save. Our proposals to simplify the tax regime will give people more flexibility over how they save their money and when they do so.
In the workplace, all employers are now obliged to give their employees access to a stakeholder pension, and the move to product regulation now means that people can buy a pension 'off the shelf', if they want.
This government's pension policy has always been based on two main planks: lifting today's poorest pensioners out of poverty and giving tomorrow's pensioners more choice. As time goes on, the choices that individuals, employers and the government will have to make will get harder and starker.
Right now, there is no crisis in pensions. Pensions are at record levels and are set to rise even further. But we have to look ahead to 15, 20 or 25 years time and remember that the choices that are being made today will have ramifications for tomorrow.
Conservative: Shadow work and pensions secretary David Willetts
Conservatives would tackle the pensions crisis by reforming state benefits, providing better incentives to save and strengthening company pensions.
To roll back the spread of means testing, we would increase the basic state pension in line with earnings, not prices. After four years, this would free one million pensioners from reliance on the means tested pension credit. And it would send out a clear signal that it pays to save.
In order to provide more vivid incentives to save, we are looking at how we could use the principle of 'buy one, get one free', with government contributions topping up the money that people put aside themselves. We would also remove the rule that people must use their savings to buy an annuity at the age of 75, instead requiring them only to ensure that they won't have to fall back on means-tested benefits.
To strengthen company pensions, we would scrap FSA rules that prevent employers who pay money into an employees' pension scheme from telling their staff about the benefits of joining.
And we would give senior executives an interest in ensuring that their staff had access to a good pension scheme, removing the cap on the amount of money that bosses can have in their pension pot on the condition that every employee of the company has access to the scheme on similar terms.
There is no 'silver bullet' that will solve every aspect of the pensions crisis. But through these measures, a Conservative government would tackle a problem that is now at the forefront of all our minds.
Liberal Democrats: Work and pensions spokesman Steve Webb
Any solution to the pensions problem has to start with radical state pension reform. The government has pursued a policy that has introduced mass means testing to pensioners; already more than half of all pensioners are caught in the net, and the government predicts that this could increase to two thirds within a generation.
The biggest problem with the new pension credit is that it fails to reach around one third of those eligible. However, it also produces a disincentive to save. Savers and pension providers have no idea just how much private pension will be means tested away in retirement. The view that 'it's just not worth it' is all too common.
A Citizen's Pension (CP) based on a simple residency test and paid at the government's 'guarantee credit' level, currently £105.45 a week, would virtually eliminate means testing. This cannot be achieved overnight, but we propose at first paying it to the oldest pensioners who tend to be the poorest. This move alone would lift one million pensioners out of means testing.
We also propose scrapping the current requirement for pensioners to convert their pension pot into an annuity by the time they reach 75. Once the CP is extended to all pensioners, the argument that they could 'blow the lot' and end up on means tested benefits becomes irrelevant. The CP lifts pensioners above the means test and allows them the freedom to decide how best to spend their savings.
Occupational pensions need major reform. We would introduce a kite-mark scheme, which would provide much greater transparency and allow jobseekers and employees to make much more informed decisions. We would also ensure that employees are automatically enrolled into company schemes, allowing employees an opt-out, whereas in most companies it is up to the employee to opt in.
We would also ensure that compulsory retirement ages are scrapped. Workers need to be judged on their ability to do a job and not the date on their birth certificate.
The above texts are edited versions of articles which first appeared in the Parliamentary Monitor magazine.
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