James Daley: Not so much the dawn of a new policy on pensions, more a series of blunders

Click to follow
The Independent Online

As the titanic pensions crisis has moved closer to a rather large iceberg over the past few years, the Government has been making a good job of rearranging the deckchairs on what will very soon be a sinking ship.

Stakeholder pensions and pensions credit, which have been two of the only material additions to the UK pensions landscape since Labour came to power, have done little to improve pensioners' living standards today and nothing to solve the problems of tomorrow. In the case of the pensions credit, the net effect has, in fact, been to disincentivise many of tomorrow's pensioners from saving at all.

When it comes to the big issues - such as developing a strong, incentivised savings culture, and educating people about how much they will need to provide for a healthy retirement - little progress has been made.

But the past few weeks have seen a sea change in the Government's attitude. After months of ministers defending pensions credit and procrastinating over other major policy initiatives, the new work and pensions minister, Alan Johnson appears to have made more climbdowns and announced more new policies than all his predecessors put together.

Just this week, he became the first minister to admit that pensions credit could be a disincentive to saving. And he added that the Government was having problems ensuring that the new credit was being taken up by its target audience - another concession that the Department for Work and Pensions had until now been unwilling to make.

On the topic of compelling employers to contribute to their workers' pension funds, an idea which the Government has historically shied away from, Mr Johnson also made a volte-face, warning businesses that he would not hesitate to look at compulsion. And as for "auto-enrolment" - all employees being automatically registered for their company pension scheme, unless they ask to opt out - Mr Johnson declared that this was now Government policy, even though it has not officially made it past the consultation stage yet.

Is there something in the water at the DWP, or are we seeing a genuine changein the Government's attitude to pensions? Has Adair Turner's frank report last month - which illustrated the extent of the pensions crisis - finally shaken the Government into realising it is time to face the problem? Or (and this is the one that I would put my money on) has the Government momentarily taken its eye off the ball and left Mr Johnson to make a series of off-message blunders, for which he is inevitably going to be reined in very soon?

With Gordon Brown still wedded to the idea of means-testing, the chances of pensions credit being scrapped, without being replaced by something very similar, are slim to zero in the near future. Furthermore, the Government has made it clear it does not plan to do anything towards solving the pensions crisis before next year's election.

Though Mr Johnson has been more honest than any of his predecessors, my guess is that such honesty is meaningless as long as he is not peddling the party line. I hope I am wrong. I hope we are seeing the start of a new era of progressive pensions policy. But with a Government in which change has always been a slow process, it is hard to take Mr Johnson's words as anything other than false hope.

* The sale of mortgages became a fully regulated activity this week. However, the most important result of the changes is that you'll be better protected if things go wrong, and the sales process should be much more transparent.

Amongst the new measures, for example, is the stipulation that every mortgage will be sold using a "Key Facts" document, which will tell you all the important bits about the product you're buying, and highlight any tie-ins or unusual clauses and charges.

To help us keep the industry on its toes, and ensure brokers adhere to the new rules, drop us an email (cash@independent.co.uk) if you're shopping for a mortgage and don't feel the process has been as smooth as it should have been.

Heads still in the sand over long term care

When Adair Turner released his report on the extent of the pensions crisis last month, I asked him why he took no account of the rising costs, and rising number of people in need of, long-term care?

Mr Turner dismissed the question, saying he had to draw a line to his inquiry somewhere. But his decision to give no consideration to the reality that one in four elderly people will have to pay for care - most of whom cannot afford to - was an oversight, and a missed opportunity to give some desperately needed public profile to a forgotten problem.

The issue of retirement savings and the cost of care are inextricably linked. With access to Government-funded care places becoming difficult to come by, more people are having to pay their own care bills - something they have usually made no financial preparation for. This can cost them their house, or forces them to move care homes when the money runs out.

If some consideration is not given to this problem, the Government will be facing a crisis with all the same ingredients as that of the pensions debacle - an ageing population with an increasing number in need of subsidy to fund their care. Six years since the Royal Commission highlighted these challenges, it is disappointing to see that not only the Government, but also its independent commissioners such as Mr Turner, refuse to face up to this time bomb.

j.daley@independent.co.uk

Looking for credit card or current account deals? Search here

Comments