Cautious welcome to green paper plans to simplify pensions

by Simon Bottery, Director of Fundraising, Policy and Communications

At last the coalition has published its pensions green paper, to generally positive response. Most commentators - including Independent Age - have given a cautious welcome to the plans to simplify the current system. For us, the fact that a third of today's pensioners are not claiming the means-tested element of the pension means that the current system has failed and needs reform. However we should be careful about at least two elements of the green paper.

Firstly, the very complexity of the current system is hampering attempts to understand what is proposed by way of reform. At the moment even pensions analysts are struggling to understand how the new proposals for a more generous flat rate pension can be achieved without either costing more or having some 'losers' as well as gainers. As one Conservative MP asked us, 'if cost neutral, who loses?' Or as the GMB union puts it with more hostility, 'the real question is what the government is taking away, not what it's promising to provide'.

At this stage, probably only the government itself (and particularly the impressive pensions minister Steve Webb) has the data, analytical capacity and understanding of the current proposals to answer this question, but it will become clearer. The second reason we should be cautious is that the green paper does not propose a flat rate pension outright but as an 'option' and it also suggests an alternative, which is essentially a speeding up of plans to phase out the current second pension.

Amid all the headlines about a £155 flat rate pension for all, this option has rather been overlooked. It may be, though, that the cautious heads inside the Treasury and elsewhere see this as their banker bet if the flat rate idea runs into problems.

The mystery of IDS' flat rate pensions speech is now solved! #budget11

by Simon Bottery, Director of Fundraising, Policy and Communications

So now we know the solution to the mystery of Iain Duncan Smith's missing speech. He shelved the announcement of a flat rate pension at the Age UK conference because he didn't want to/was not allowed to steal the Chancellor's Budget thunder.

Except that the sound turned out to be not so much thunder as the vague echo of music we've already heard. Once again the government said little beyond the fact that it was considering the options, adding that any scheme would not apply to current pensioners. The figure of £140 was quoted again but without any clue as to whether this was at today's prices or some future date. So what on earth is going on? I don't pretend to know, but on this evidence you can expect the next installment to come not in any official way but as an unattributable briefing to a Sunday paper. Government by spin, anybody?

Officials search Whitehall for rest of Iain Duncan Smith's pensions speech to Age UK conference #af11

by Simon Bottery, Director of Fundraising, Policy and Communications

Officials are hunting all over Whitehall for the second half of Iain Duncan Smith's speech on pensions to the Age UK conference yesterday. The Work and Pensions Secretary was supposed to announce a £140 flat rate pension, heavily trailed in that morning's media. But after a promising opening to the speech, the minister simply called for an open debate on pensions reform and sat down. It is now believed that the second half of the speech was blown out of an open taxi window on the way to the conference, or was eaten by the dog, or spontaneously combusted - no one is quite sure.

Sceptics have raised other, unrealistic possibilities for the missing content. Some have said that it was spiked by the Treasury, which still isn't convinced that the proposal will cost nothing (you can see where they're coming from - administration savings are somehow supposed to pay for a 40% increase for most pensioners and a 10% increase for those currently getting the pension credit top up). Others suggest that the Chancellor loves the idea but wants to have a share of the announcement of it.

A shame. As IDS said in the half of the speech he was able to deliver, the current system is so complex that no one knows what they are going to get, which hardly encourages retirement planning. And since a third of those eligible for pension credit don't claim it, the system allows hundreds of thousands of older people to live in poverty needlessly. So the time for reform is long overdue. Looks like we may have to wait just a little longer for that speech to be found before we can see what type of reform the coalition intends.

State pension plans: Ferrari for Christmas or coal-filled stocking?

by Simon Bottery, Director of Fundraising, Policy and Communications

Everyone can have a Ferarri for Christmas because Santa's going to be more efficient with his elves: this is what we are supposed to believe about the coalition's apparent plans on the state pension. The idea that a higher pension for all can be achieved simply by getting rid of the costs of administering pension credit is, like Santa (look away children), a fantasy. Pension credit may be expensive to administer at around £50 per person, per year, but that amount of saving will barely get you a tank of petrol, let alone a supercar. Clearly the extra money for the superpension has to come from somewhere and until we know where we should avoid the temptation to look for garage space for that Ferrari. Almost as interesting is the question of who gave the story to the Daily Mail last Monday? Lib Dems in an attempt to spread some pre-Christmas cheer (the superpension is the brainchild of LibDem pensions minister Steve Webb)? Or Tories in an attempt to prevent it?

Questions questions – what would reform of the state pension mean for us all?

By Claire Nurden, Research and Policy Officer

News of proposed reforms to the pensions system hit the papers in the last few days, and as we all get our heads around the possible changes only one thing is clear – we need more information!

At Independent Age our initial reaction was that, of course, any moves to transfer the cost of bureaucracy into older people’s pockets are welcome. But we mustn’t forget that pension credit currently plays an important role in passporting people through to other support, like council tax benefit. If these reforms go ahead then thought must be given to ensuring the poorest older people still receive everything they are entitled to. Or could this signal the end to means-tested benefits altogether?

And what of the Government’s calculation that the money saved from eliminating means testing will be enough to fund the change? Some personal financial experts are already expressing concern about the effect this could have on the state second pension. Will it just be rolled into the single £140 payment? And will all pensioners feel the benefit of the reform or will it only affect those retiring under the new rules? In which case, can it really be the case that there will be no losers, only winners? If funding a move like this is really so simple, then the question must be raised, why on earth hasn’t it been done before?

Only one thing is certain - it was a very timely announcement given that many of this week’s winners (women and carers) were last week’s losers in the spending review.