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Ian Naismith: My shortlist for pension reform

It is the awards’ season, when the talented and the narcissistic gather to indulge in mutual back-slapping. The Oscars, Brits and countless other ceremonies are glamorous celebrations of achievement and bring a feelgood atmosphere to their industries.

Financial services has awards, of course, and some include a touch of glamour, but reading the financial press gives the impression that most of us are happier pouring cold water out of a half-empty glass than toasting success with sparkling champagne. We enjoy finding problems but not celebrating achievement.

While we indulge, as we do every year, in gloomy forecasts of Budget disaster and moan about industry failures, let me try to spread some cheer.

Recent years have seen unprecedented levels of agreement among politicians on pension legislation and we now have a pensions minister who combines expertise with social conscience and may even stick with the job throughout this Parliament. So here, in reverse order, is my short list for best pension reform.

In fourth place is pension simplification. Widely viewed as an oxymoron and complicated for those with large funds, for most of the population it means they can pay as much as they want into their pension, whenever they want.

In third place is retirement flexibility. For years, we complained about the age-75 restrictions and the inability to take big lump sums from drawdown. At a stroke last April, the Government gave us what we asked for. Speed of implementation, the increased tax charge on death before age 75 and the reduced maximum income for capped drawdown remain niggles but the extra flexibility to meet clients’ needs in retirement is huge.

Runner-up is automatic enrolment. Again, its success is by no means assured but the concept is bold and widely supported. Nest is necessary to make automatic enrolment work and is being implemented with flair. The changes will give many a solid foundation for their retirement planning.

The winner is state pension reform. Between the middle of the last decade and the middle of the next, the proportion of women retiring with the full state pension is likely to treble from about 30 per cent to more than 90 per cent. Caring for others will no longer lead to inevitable poverty in retirement and more generous NI credits recognise its vital contribution to society.

When we published our first Women & Pensions Report in 2005, the gender disparity was enormous. Now it is set to be virtually eliminated, at least for state pensions. And if the unified state pension can be made to work, despite the inevitable backlash when those who will lose out understand the situation, we can have state retirement benefits to be proud of.

Ian Naismith is head of pensions market development at Scottish Widows


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. Matthew Worthington 1st March 2012 at 4:19 pm

    Well said Ian – no denying that the finance industry has faced, and is facing, and will continue to face many challenges, and there’ll always be plenty of bad news and moans – but always good to take time to remember the positives.

  2. The trouble is that the government’s agenda for pensions bears not the slightest resemblance to what the Conservatives promised in their pre-election manifesto. We can wish for and propose all the improvements we want, but nobody’s listening. Steve Webb may give the impression that he’s “well informed” about the issues at hand, but he’s not actually doing anything to address them, either because his hands have been tied by higher powers or because, like so many politicians, he says one thing but the real plan behind the scenes is something quite different.

    Sorry to be cynical, but the evidence is plain for all to see.

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