8th January 2013

Aegon: The long, dark autumn of the sole state pension

The Government published its Green Paper ‘A state pension for the 21st century’ back in April 2011, with a summary of responses to the consultation published in July the same year. All the indications were that the Coalition was set to press ahead with Steve Webb’s cherished ambition to deliver a single-tier state pension. By lifting many more people clear of means testing in retirement, this would, according to Webb, ensure that most people have a genuine incentive to save. This would in turn be an important underpinning to the introduction of automatic enrolment.

Then came rumours that the plans had run into opposition from that perennial stumbling block of would-be pensions reformers, the Treasury. But in defiance of these rumours, the Budget in March 2012 confirmed that a White Paper was expected later in the spring.

Spring turned to glorious Olympic summer; White Paper came there none. DWP insisted the plans were still on track, though – there would indeed be a White Paper, but it would now be published in the autumn.

By the time the Liberal Democrat Party conference came around in September, Webb was arguing that autumn continued right up until the Commons rose for its Christmas recess on 20 December. As if to emphasise this, the Chancellor’s Autumn Statement – itself not delivered until 5 December – again confirmed that the plans for a single-tier state pension remained in place.

As December wore on, and eyebrows began to be raised once more, further protestations came from DWP: the plans were at an ‘advanced stage’ and would be published imminently.

Soon, everyone was too wrapped up with Yuletide festivities to pay much attention to the fact that the White Paper had still not appeared. As supplies of left-over turkey and mince pies were gradually running down, rumours began to circulate that the plans would feature as part of the Coalition’s vaunted ‘mid-term review’ in the New Year.

That review was published on Monday with much fanfare. It notes the publication of the Green Paper, but the closest it gets to a commitment to take the plans forward is the vague promise to ‘work towards a better, simple, single basic pension’.

It’s no secret that there are complex issues at stake: how to account for existing entitlements under S2P and contracted-out schemes; the status of the self-employed; how to phase in the new arrangements; and – importantly – how to communicate the changes to an understandably wary public. And there are bound to be some people who lose out from the changes. It’s entirely proper that the government should spend time trying to find ways to soften the blow for people who have ‘done the right thing’.

Our response to the initial Green Paper highlighted these issues and argued for a specialist group to be set up with representation from across the range of interests to examine the potential difficulties and advise the government on how they might best be overcome.

For all the reassurances from DWP, there’s currently precious little to show for the 18 months that have elapsed since the government’s response to the Green Paper consultation. It’s to be hoped they have been busy finding fair and sustainable solutions to these issues and that more detailed proposals will soon emerge blinking into the somewhat watery winter sunshine.

Mark Stockwell

Pensions