History in the making

Creating a fair and just pensions system has been paramount to this government.

From the outset, we wanted to introduce reforms that would benefit both today’s and tomorrow’s pensioners.

When we began a decade ago, pensions were seen as a dusty subject only of interest to people over 50 and industry experts.

But issues, such as the increasing number of older people and rising expectations for retirement, have pushed pensions up the agenda so more and more people of all ages are recognising their importance.

Despite this, it is an uncomfortable fact that around seven million people are not saving enough for their retirement.

There are a number of reasons for this inertia, not least the tendency for people to switch off and do nothing in the face of an overtly complex pensions system.

So to tackle this problem of under-saving, we propose from 2012 to automatically enrol millions of people into a good-quality workplace pension scheme or a system of personal accounts.

This measure is the main plank of the Pensions Bill 2007, currently going through parliament. If passed, it will mark one of the biggest leaps forward since Lloyd George first introduced state pensions a hundred years ago.

For the first time, participating employees will have a guaranteed contribution from their employer towards their pension.
The employee will put in a minimum of 4pc of their salary, the employer a minimum of 3pc and around 1pc comes from the government in tax relief. This means individuals’ own pension contributions will be doubled.

Of course people can opt out if they wish, but we believe that automatically enrolling them into a qualifying scheme will give those who want to the opportunity to provide extra for when they retire.

There is no doubt automatic enrolment and a wider public awareness of the importance of pensions will see the number of people in a pension scheme rise dramatically.

To give people added confidence and security, we have also ensured that no one who saves into a private pension will lose out in the future.

We have created the Pension Protection Fund and The Pensions Regulator to safeguard private occupational pension schemes.

The PPF provides a vital safety net, creating a kind of insurance fund that covers 90pc of the value of people’s pensions, while the Pensions Regulator oversees the pension system as a whole to check that unscrupulous or negligent pension schemes are not damaging it.

We have reduced poverty for today’s pensioners so that, for the first time ever, a pensioner is no more likely to be poor than anyone else. Thanks to Pension Credit a million pensioners have been lifted out of relative poverty.

Help with council tax payments and rent is also available. Pensioners, whether poor or not, have gained from entitlements to the Winter Fuel Allowance, free bus transport, free eye-sight tests and free TV licences for the over 75s.
Another simplification means the poorest pensioners can now apply for up to four benefits in one phone call. Fifty thousand pensioners will gain from this measure by 2010.

In July 2007, the government passed laws to simplify state pensions and reduce the inequalities between men and women.

For example, from 2010 the number of years someone must pay National Insurance contributions to get a full basic state pension will fall from 39 for women and 44 for men to 30 years for everybody. As a result, the number of women getting a full basic state pension will rise from a third to more than 90pc in future years.

Overall, this government has transformed the UK’s pensions system to ensure a better financial future for both today’s and tomorrow’s pensioners.

These reforms have made the system simple and more generous and given people a solid basis on which to save.
Many of these changes do not hit the headlines because they are not politically controversial.

But this broad party agreement should not be misunderstood – these changes are radical and far-reaching.

As MPs debated the complex provisions of the latest Pensions Bill over the past few weeks, there is no doubt history was being made.