Steve Webb is absolutely right – UK pensions are a mess – but he is wrong in blaming charges.
The first flat rate state pension was instigated over 65 years ago, and has been followed by the Graduated scheme, Serps, reductions in Serps and S2P. Now the wheel has gone full circle with everything being abandoned for a new flat rate system with a complex hangover of benefits from the past.
In the private sector, far-reaching legislation, regulation and tax changes have had the effect of actually reducing the number of employees with adequate pension provision.
Final salary schemes have virtually all been abandoned leaving often ruinous liabilities on companies, following, among other issues, raids on surpluses by the government and removal of valuable tax credits.
Additional complications have been caused through the introduction of personal and stakeholder pensions. In addition, contracting out has left the Government with their own misselling scandal that they will not even acknowledge.
Governments of all colours have reduced the tax relief on contributions and brought pension funds into the tax net. Further reductions in tax benefits are threatened.
Finally we have auto enrolment – a step in the right direction but not enough and too late. Keith Joseph’s pension bill 40 years ago was on the same lines with higher contribution rates but was abandoned with a change of government. If only.
All this change has been dealt with by superimposing legislation and regulations on what already existed causing appalling complexity.
History shows politicians’ actions on pensions have been disastrous. Webb should pay heed to that – market forces are dealing with the charges issue and an enforced cap is going to lead to unintended consequences.
Creative Auto Enrolment