The first anniversary of the Coalition government has marked a year of relentless pension reform. Helen Morrissey asks the industry whether these reforms have been successful
As the UK’s coalition government celebrated its first anniversary on May 11th, it also marked a frantic period of pension reform. Over the past year, the pensions minister Steve Webb has presided over among other things, an acceleration in the increase of state pension age, the abolition of the default retirement age and pension tax relief reform. The Hutton Review has given its verdict on public sector pensions and we have also seen a change in how pension increases in retirement are calculated. At the time of going to press the next major project on Webb’s list is reform of the Basic State Pension which will abolish the complex regime of means tested benefits and enable all pensioners to benefit from a flat rate Basic State Pension of £140 ($231) per week.
While the reforms have by and large been praised by the industry there are concerns about the rate at which they are being pushed through.
“I think the Coalition government has done a decent job so far but sometimes you feel they’ve tried to pack too much in and now it seems a bit rushed,” said Standard Life’s head of pension policy John Lawson. “They’ve got five years to bring these changes in yet they’ve packed it into nine months – I guess it reflects a keenness to get on with the job.”
While keenness may be one reason behind the pace of reform, Legal & General’s pension strategy director Adrian Boulding believes there are other reasons for the government’s haste.
“This government has pushed through reform at a pace faster than we’ve ever seen before,” he said. “I think this is driven by the fact that Coalition governments are fundamentally unstable and the wheels could come off at any time.”
On being made pensions minister Webb decided to revisit areas of pension policy brought in by the previous Labour government. This included accelerating the increase in the state pension age from 65 to 66. Under the previous Labour government this change was due to happen in 2026. However, Webb has moved this forward to 2020. Webb also promised a review of auto-enrolment due to begin in 2012. (For more on auto-enrolment click here) While many in the industry speculated the review would signify an end to auto-enrolment, the decision was taken to go ahead. The Pensions Management Institute’s technical consultant, Tim Middleton believes the government has taken a sensible approach.
“Putting pension age back a year is a good concession to make considering Basic State Pension could rise to £140 per week,” he said. “I would also like to congratulate them on the non-partisan role they have taken with regards to auto-enrolment – they reviewed it in a fair and objective fashion and have been pragmatic in their approach.”
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