Government needs to tackle the pensions crisis

Last week the Government published its Pensions White Paper. It has received a broad welcome from across the political spectrum despite their being no attempt to form a consensus. A political consensus is vital as it is important that pensions reform is long lasting and can survive changes of Governments into the future. Whatever our separate party political motivations, the duty of all elected representatives is to do what is right for the long-term interest of Britain.

Conservatives are encouraged by plans to re-instate the earnings link to the Basic State Pension so that in the future it will increase in line with people's average earnings and not prices. Conservatives have been calling for the earnings link to be re-established for a number of years. It is concerning however that the Government has said that it may not happen until as late as 2015. In the intervening 9 years, pensioners will get relatively poorer and will remain stranded on means tested benefits. The Government has said that it is subject to "affordability and the fiscal position", a comment which smacks of a deal between the Prime Minister and Gordon Brown to water down the plans, and gives the Chancellor a 'get out of jail free card' if he becomes Prime Minister.
The White Paper is good news for women and carers. A more flexible carer's credit will be introduced and there will be a reduction in the number of years needed for a full State Pension. This should be welcomed as for too long the women have been penalised by a system designed more for the 1940s, than the 21st Century. However again the Government is delaying the change, until 2010, meaning that millions of women retiring, or already retired, will be left behind. Over a million women will retire between now and 2010 without a full contribution record and therefore will not get a full Basic State Pension. This is on top of the 3.8 million women already retired on a partial State Pension.

It is quite right that in the future the state pension age should increase, reflecting the fact that people are living longer and in many cases starting work later. This reflects the changes made in private sector pensions. What is scandalous is that the Government refuses to tackle public sector unions in some cases public sector workers will continue into the future to retire on a full pension at age 60. Public sector workers deserve fair treatment, the same as everyone else but they, too, must share in shouldering the burden of adjustment.

A new Private Pension Saving scheme will be introduced with people automatically enrolled. Employers, employees and the state will share the cost of contributions. It won't be compulsory but the rigmarole of having to complete a form to opt out will likely mean that most people will end up paying into the new scheme. This idea of auto enrolment has proved extremely successful in the private sector in increasing membership of occupational pension schemes. The Government has not yet explained whether or not it plans to run this new savings scheme. It certainly should not and it should be left to the pensions industry.

There is no mention about the Governments much trumpeted Stakeholder Pensions which were introduced a few years ago. Presumably these an now expected to whither and die, now that the Government has a new initiative.

The Government is very proud of the Financial Assistance Scheme that it has introduced to help members of pensions schemes which have collapsed. It will increase the funding of the scheme to £2b. However no mention is made of the £5b a year that Gordon Brown has raided from our pensions since 1997!

Despite being a step in the right direction, the Pensions White Paper stills leaves us with a horrendously complex, underfunded pensions system, riddled with unfairness. The Government had the opportunity to do much more. The next step is to build on these reforms and ensure that the solving the pensions crisis remains top of the political agenda and is not now kicked into the long grass.