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Eagle eye on pension prize

Minister of state for pensions and the ageing society Angela Eagle is unfazed by what she calls the “scare-mongering” of the pension industry and opposition parties who are calling for reform of public sector pensions.

She says public sector pension liabilities are 1.5 to 2 per cent of GDP, which is sustainable and the Government does not intend to reform the sector. She says: “We have made changes in retirement ages in the public sector, we have done cost-capping and cost-sharing arrangements and agreements in the public sector which maintain the sustainability of these pension systems.

“I do not see why, when we are spending our whole time saying people are not saving enough, that we think that the right approach to that is to destroy the savings of very low paid, in many cases part-time, workers in the public sector who are not served at all by the financial services industry because they cannot make a profit from them.

“They are affordable and anyone who says any different is purely scaremongering and being very destructive. You have to remember the average size of the second pension in the public sector is £5,000. That is not a king’s ransom.”

As the 10th pensions minister in the 12 years that Labour has been in power, Eagle seems undaunted by the huge task she and the Government face in implementing pension changes.

She refutes the suggestion from several quarters that the pension programme is not radical enough and says the Department for Work and Pensions has “the luxury of time” to develop long-term pension policies.

“I do not think that now is the time to start unpicking all of the work that we have done since 2004. I think we should resist the temptation to chop and change and we have to build on what we have got but first we have to deliver what we have decided to deliver.”

On personal accounts, Eagle believes that the issue of means-testing must be put in perspective and is not a reason to ditch the reforms. Eagle says there are 5 per cent of people for whom personal accounts will not be suitable and this makes it difficult to give advice to individuals on whether to stay in or opt out because this 5 per cent of savers cannot be identified.

She says: “Nobody knows what somebody’s life is going to bring and financial advisers can often be very insightful but they do not have crystal balls and nor can they ever express a total certainty, especially with people on very low earnings. But people tend to be on low earnings and then move up, so I think they just have to set out those cho- ices, don’t they?

“They cannot ever say absolutely for certain, you, personally, even though I do not know how your life is going to pan out, will be better off” They can say 95 per cent of people are better off and 70 per cent of people will get out twice as much as they put in and that accessing tax relief from the Government and having a guaranteed employer contribution is a very good thing.

“We can have a closer look as we get nearer to the time of del- ivery about how advice would work but I do not think any IFA should be selling total and utter certainty, including what will happen in people’s lives, because nobody can know.”

She also blames advisers for the public’s wariness of saving into pensions.

“Since personal pensions were created in the 1980s, there have been some serious misselling scandals and that is why people are wary of saving into products like that.”

Eagle also dis- misses the idea that personal accounts will compete unfairly with existing pension schemes and says that the industry has ignored low to middle-earners and personal accounts will redress this imbalance. “There would not be a gap in pension savings if the industry had structures that served that area.”

Money Marketing revealed last month that the Government is doubling the timescale for the implementation of auto-enrolment and that full benefits for all employees will not be achieved until 2016.

Eagle says: “I would love to get my magic wand out and be able to have everyone auto-enrolled on the same day but life is not like that. We have to deliver this in a way that is operationally safe and our best advice from all the people who know and do this kind of thing is that it will take three years to be safe.”

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