Pension reform still to be addressed

Harriet Harman may have gone but the pressing problems of pension reform and long-term care for the elderly remain

TONY BLAIR has signalled his displeasure at the slow and uncertain progress of welfare reform by "resting" Harriet Harman. But will Alastair Darling do any better? Welfare to Work is taking its first hesitant steps but, as everyone but Gordon Brown can see, its success or failure depends on whether the economy continues to grow fast enough to create more jobs and offset the increasing number of redundancies now being created, especially in the manufacturing sector.

The crackdown on benefit fraud is at an even earlier stage of development, and depends essentially on better co-ordination of records between different government agencies.

The poorest pensioners and sick people on waiting lists will be catered for in the spending plans announced last month. But that still leaves pension reform and long-term care as urgent policy priorities for Mr Darling to tackle. Even before the possible need for mandatory membership of a private pension has been debated, plans to make private pension plans available for everyone have run into difficulties and need a fresh approach.

Government proposals are rightly being criticised because they imply that managed pension funds that are not eligible for official approval are not as good as tracker funds, which do qualify. There is also a serious risk that novice investors will take the proposed kite-mark as a kind of financial guarantee, which is even more dangerous.

Mr Darling needs to start again, and to introduce a one-star rating for all pension plans that offer low and easily understood charges. Equally important, he must make it clear that three-star status is something that can be attained only after years of successful investment by a company. It simply cannot be earned in advance.

The other task for welfare reform is how to pay for long-term care for an ageing population. The Royal Commission set up by the Tories is due to report by the end of the year. It will probably come out in favour of a version of the partnership plan, whereby anyone who insures for the cost of two or three years in a home will then qualify for state aid if they outlive their insurance policy.

But that will not necessarily persuade people to take out either pension plans or LTC policies. Experience shows that about 20 per cent of people are convinced that they will not live long enough to enjoy a pension, and that if they do, the state will provide for them at the expense of both current taxpayers and those pensioners who have paid for their own future.

Four out of five people die before they qualify for acceptance into an old people's home. That is why only about 5,000 new care policies were sold each year, even though 40,000 people are being forced to sell their homes to pay for care. The fact is that spending money now to buy pensions and policies that they may never need, or live to benefit from, is a double turn-off for many people.

The only way to increase the take-up of these vital elements of welfare reform is to market combined life assurance, pension, care and investment plans that guarantee to pay back some capital if the pension and long- term care are not needed. Even that will require some clever marketing, and a guarantee that the charges are as low and as clear as possible. Such policies will also need tax sweeteners, including tax relief for people to buy plans to pay for parents who are already too old to buy their own policies to protect the family home. That is where Mr Darling should be targeting his priorities, as soon as he possibly can.

Have you tried new the Independent Digital Edition apps?
ebookA delicious collection of 50 meaty main courses
Life and Style
ebookNow available in paperback
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
Chuck Norris pictured in 1996
Arts and Entertainment
Sarah Lucas, I SCREAM DADDIO, Installation View, British Pavilion 2015
artWhy Sarah Lucas is the perfect choice to represent British art at the Venice Biennale
A voter placing a ballot paper in the box at a polling station
Arts and Entertainment
The Queen (Kristin Scott Thomas) in The Audience
theatreReview: Stephen Daldry's direction is crisp in perfectly-timed revival
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    SThree: Trainee Recruitment Consultant - Dublin

    £13676.46 - £16411.61 per annum + OTE: SThree: SThree Trainee Recruitment Cons...

    Ashdown Group: Marketing or Business Graduate Opportunity - Norwich - £22,000

    £18000 - £22000 per annum + training: Ashdown Group: Business and Marketing Gr...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + Commission: SThree: Are you great at building rela...

    Ashdown Group: Database Analyst - Birmingham - £22,000 plus benefits

    £20000 - £22000 per annum + excellent benefits: Ashdown Group: Application Sup...

    Day In a Page

    General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

    Miliband's unlikely journey from hapless geek to heart-throb

    He was meant to be Labour's biggest handicap - but has become almost an asset
    General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

    On the margins

    From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
    Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

    'This is the battle of young Egypt for the future of our country'

    Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
    Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

    Why patients must rely less on doctors

    Improving our own health is the 'blockbuster drug of the century'
    Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

    Flesh in Venice

    Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
    11 best anti-ageing day creams

    11 best anti-ageing day creams

    Slow down the ageing process with one of these high-performance, hardworking anti-agers
    Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

    Juventus vs Real Madrid

    Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
    Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

    Ashes series looks a lost cause for England...

    Whoever takes over as ECB director of cricket, says Stephen Brenkley
    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power