Heather Dale talks to Nigel Waterson, Shadow Pensions Minister for the Conservative party
Heather Dale: What do you think of the state of pension provision in the UK at the moment?
Nigel Waterson: I think it is disappointing. To quote Labour MP Frank Field: in 1997, we had some of the strongest pension provision in Europe, now we have some of the weakest. There have been enormous numbers of closures of defined benefit (DB) schemes and the 125,000 of course who seem to have lost their pensions. Heather Dale: Are there any systems around the world that you think the UK could learn from?
Nigel Waterson: For the most part we still have many things to teach other countries, but we have been mostly looking at the experience with New Zealand's KiwiSaver scheme, because it is somewhat similar to the personal accounts system that is being introduced here in 2012. I am also hoping to get over to Holland fairly soon because we would like to look at risk sharing and ways in which we can kick-start DB provision again, under the broad banner of deregulation. I have also had a close look at the 401(k) system in the US, I think the effects of autoenrolment are quite encouraging and the Conservatives have long believed in auto-enrolment: we had it in our last manifesto and we support the Turner settlement, we have never believed in full compulsion. I think the 401(k) [system is] interesting. I think it is always dangerous to try and transfer a system from one country to another, but I think one of the attractions of the 401(K) system is that it is simple and accessible, easy to understand and straightforward - I think with so much complexity in our system, both in pensions and the benefits system, that's our downfall in many ways.
Heather Dale: The Pension Protection Fund (PPF) has apologised to 41 pension schemes which face higher levies due to a mistake in the organisation's advice over insolvency risk calculations. What are your thoughts on the PPF and its predecessor, the Financial Assistance Scheme (FAS)?
Nigel Waterson: I think in many ways the PPF has been quite successful. Cleary it under-collected last year and that's meant higher levies this time. But, when we were dealing with the Pensions Act 2004, we insisted there be an overall cap on the level of the levy, [and] I am reasonably comfortable with the job that Lawrence Churchill and his colleagues have done. They are much more efficient than the FAS and we have always argued that the same people should run both. The FAS has been an unmitigated shambles - at one point they were spending more money on themselves than they were paying out to their victims. I always said it was crazy to set up a completely different organisation in a different part of the country, but I suspect the reason the government did that was because it wasn't [as] obvious people were getting much less generous treatment out of the FAS than under the PPF.
Heather Dale: The introduction of the NPSS in 2012 in UK will be in contrast to Sweden and New Zealand, as the government was adamant the operational collection of money and investment would be carried out by the private sector. What are your thoughts on this?
Nigel Waterson: The Holy Grail would be to collect it through the National Insurance System, but this just doesn't work under our system because it is so much in arrears and I think that is a pity. I have already had one meeting with Paul Myners and Tim Jones and they are not unaware of the scale of the task facing the Personal Accounts Delivery Authority. It's a massive challenge - there is no pension scheme in the world that has potentially 9 million members suddenly appearing on one day.
Heather Dale: Brown removed tax credits on dividends in 1997, would the Conservatives put these back if they got elected back into power?
Nigel Waterson: There is no doubt that decision in 1997 had a massive effect on pension funds - some experts reckon £100bn has been stripped out of pension funds, but we are looking at various ways we can put that right. It may not be a question of restoring the tax credits, there may be other ways to do it, but clearly the damage has to be repaired. We haven't reached a final conclusion and the next election is a couple of years away, but it seems to us that untold damage was caused to pension funds and it has got us largely into the mess we are in at the moment.
Heather Dale: What else would you change if you got elected back into power?
Nigel Waterson: The timing is quite crucial: assuming the election is 2009-10, we will immediately have a review of the design of Personal Accounts. At the moment, we are part of this consensus mode and broadly we support the Turner settlement for pension reform, but we do have major worries about means testing, levelling down and the design of Personal Accounts, so if our views aren't met, we will seek to amend [the system]. We agree with the foundations that are being laid in the near future but we may have to change the super structure. Also, we would push harder and faster than the government seems to be keen on doing at the moment on deregulation - we are almost in the last chance saloon on DB schemes, if people are going to keep them open we need to encourage them to do so.
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