Outlook: Darling finds a workable solution

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The Independent Online
NEW LABOUR promised sweeping reform of pensions provision. The Maxwell affair, the scandal of pension mis-selling, the reduction in benefits for those contributing to Serps, the breaking of the link between the rise in average earnings and the basic state pension - all these contributed to a sense of national outrage over provision for the retired. It was one of the reasons why John Major lost the election.

As with many things, however, Labour entered government with no clearly defined policy on pensions, other than to do something about the whole wretched mess. Harriet Harman and Frank Field were instructed to conduct a pensions review, they consulted and consulted, argued and argued, and having failed to agree on anything, they were eventually fired.

Now Alistair Darling, the new social services secretary, has come up with what looks to be a rather sensible set of proposals on which the savings industry can be reasonably confident of delivering. True, these proposals stop a long way short of the root and branch reform of pensions provision promised while in opposition. Like Labour's reform of the welfare state, or what we've seen of it so far at least, this is more a case of tinkering with the present system than revolutionising it.

But in the end, this may be no bad thing. There was always a major difficulty with introducing compulsion into saving for pensions - however it was dressed up, it would seem like a tax. The Government's alternative proposals for a stakeholder pension for middle income earners without other pension arrangements are commendably simple in composition, while the enhanced system of national insurance rebates ought to ensure the necessary incentive to save.

What's proposed is a savings product a bit like a PEP, a simple, basic thing that everyone ought to be able to understand. The devil will be in the detail, of course, but on the face of it, there's something workable here.

By providing a second tier state pension for lower income owners, which in truth seems to be just a clever piece of house keeping in that it will act as a substitute for the present system of income support, the Government faces up to the industry's reasonable insistence that it is just not possible economically to provide a stakeholder pension for those saving only very small amounts of money. Not a revolution, perhaps, but a very plausible stab at the problem.

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