James Daley: It's time to grasp the pensions nettle

Over the past few years, the Government has been busy laying the groundwork for what could be the biggest financial mis-selling scandal of all time. In the environs of Westminster, this dangerous piece of legislation goes by the name of the Pensions Bill – an Act of Parliament that, in its current shape, will ensure that, in four years' time, every working man and woman is automatically made to start contributing to a savings scheme, which may leave them no better off by the time they retire.

Auto-enrolment, as a concept, is certainly no bad thing. After all, in today's "spend more, save less" society, people are not putting nearly enough away for their retirement, and are, therefore, in need of a little encouragement when it comes to pensions.

The problem is that the current state-pension system – which is based heavily around means-testing – is such a mess that people cannot know for sure that every pound they save will make them at least a pound better off in retirement. Although the introduction of means-tested pensions-credit was a great short-term fix, which helped pull a large number of pensioners out of poverty, one of its unintended consequences was that people who have saved nothing can still end up with as much money as people who saved modestly their whole life. And this situation is now threatening to undermine the entire process of pensions reform. The obvious and simple solution, proposed by numerous think-tanks, is to raise the level of the state pension so that means-testing is no longer necessary.

But this is a proposal that Government ministers always immediately dismiss as unaffordable. However, with a rethink of pensions tax relief (which still, perversely, benefits the highest earners) and a shift to a funded system (whereby each individual's national insurance contributions goes into a pot to pay for their own pensions, not the pensions of those retiring today), it is not impossible.

The great thing about pensions is that they are a long-term game and so, with some clever thinking, it should be possible to spread the costs over decades, rather than having to pay for it all upfront.

Insiders, however, say that it's not just a matter of cost. Part of the problem is that, as Gordon Brown came up with concept of pensions credit, he is stubbornly resistant to the idea of getting rid of it.

But with Brown's government now seemingly on borrowed time, it's up to the Conservatives to seize the initiative and to put a stop to the current Pensions Bill. Back in January, when the bill started its second reading in the House of Commons, shadow Work and Pensions secretary Chris Grayling made a bold speech about how he'd continue to fight the Government over the difficult issue of means-testing.

In the event, however, the Tories waved the bill through, in spite of its many flaws, and seem to have lost their desire to fight.

But if they feel that this issue is no longer worth fighting for because Labour is dead in the polls, they're wrong. The Pensions Bill provides an opportunity to design a system which will serve our country for generations. And, in two years time, it may well be Grayling who inherits the Department of Work and Pensions, along with a mess of ill-thought-through legislation to untangle.

Although it will shatter the fragile cross-party consensus that everyone has been so keen to maintain during the recent pensions reform, it's now time for the Tories to use their weight to ensure that the Pensions Bill is not yet another wasted opportunity to reform the savings landscape for the better.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Software Developer / C# Developer

    £40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

    Neil Pavier: Management Accountant

    £45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

    Sheridan Maine: Commercial Accountant

    £45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

    Laura Norton: Project Accountant

    £50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

    Day In a Page

    Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

    Sun, sex and an anthropological study

    One academic’s summer of hell in Magaluf
    From Shakespeare to Rising Damp... to Vicious

    Frances de la Tour's 50-year triumph

    'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
    'That Whitsun, I was late getting away...'

    Ian McMillan on the Whitsun Weddings

    This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
    Kathryn Williams explores the works and influences of Sylvia Plath in a new light

    Songs from the bell jar

    Kathryn Williams explores the works and influences of Sylvia Plath
    How one man's day in high heels showed him that Cannes must change its 'no flats' policy

    One man's day in high heels

    ...showed him that Cannes must change its 'flats' policy
    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
    Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

    Laughter, but no tears, as Letterman takes his bow after 33 years

    Veteran talkshow host steps down to plaudits from four presidents
    Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

    Hozier's 'blasphemous' song takes Novello award

    Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
    Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

    Join the tequila gold rush

    The spirit has gone from a cheap shot to a multi-billion pound product
    12 best statement wallpapers

    12 best statement wallpapers

    Make an impact and transform a room with a conversation-starting pattern
    Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

    Paul Scholes column

    Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?