Shadow pensions minister Nigel Waterson is in a belligerent mood when Money Marketing catches up with him at the Conservative Party conference in Manchester.
As Money Marketing revealed last week, Waterson is still reeling from the Government’s failure to pre-warn the Tories of their announcement that the timescale for auto-enrolment would be doubled from 18 months to three years, meaning some employees will not receive the full benefits until 2016.
In fact, the Tories are so concerned about the delay that Waterson says it “casts a shadow over the whole project” and confirms that, though they do not have any plans set in stone as yet, they are looking closely at New Zealand’s KiwiSaver model.
Part of the Conservative manifesto in the last election, the lifetime savings account looks as though it could become a reality, giving savers early access to the account for important life events such as buying a first home or funding healthcare. It is as yet unclear whether such a scheme would substitute or complement personal accounts.
At the Labour Party conference in Brighton the week before, pensions minister Angela Eagle dismissed concerns that public sector pensions are in urgent need of reform, arguing that the burden on the public purse of 1.5-2 per cent of GDP can be comfortably sustained.
Waterson is riled by Eagle’s comments: “Senior civil servants, even some GPs, have got huge pension entitlements and I think we are going to look quite hard at capping some of those.
“It is just living in a fool’s paradise to say there is no problem funding public sector pensions. We are talking about more than £1tn of liabilities already which will just keep ratcheting up, so we are committed to looking at it as a new Government along with stakeholders like unions.”
But he says some progress has been made already in reducing the burden. “We tend to talk about public sector pensions as if it is one monolithic thing but in fact with some schemes such as the teachers’ scheme, for example, they have made some progress in reducing the liabilities by increasing the pension age. That is the kind of incremental process we would adopt across the board.”
Waterson says while the Labour Government has “completely given up” on defined benefit schemes, the Tories have not. “We are willing to look at any way of encouraging good employers to keep DB schemes open, whether it is risk sharing like conditional indexation, reducing red tape and bureaucracy and the cost involved because we all know that DB schemes are most likely to deliver a comfortable retirement.”
He is also unimpressed at what he calls the “propaganda” put out by the Government and Personal Accounts Delivery Authority, which says that the vast majority of people will be better off saving into a personal account despite the impact of means-tested benefits.
He warns means-testing could “fatally” undermine the whole project.
“It is an urgent priority for us because Pada and the Government are still pumping out the propaganda that the vast majority of people will be better off, whatever ‘better off’ means. But even if you believe the Government’s figures, about half a million could be no better or worse off. Are we just going to abandon them to their fate? We don’t think so.”
Pensions minister Angela Eagle was unconcerned by the means-testing issue when Money Marketing interviewed her last week.
When asked whether a solution should be proposed, Eagle said: “Like what? They will be qualifying for means-tested benefits which will keep them at a certain level of comfort. I am happy to keep an open mind about these things but I think it is important we get that issue into perspective.”
The Tory view is clearly different but even they have not as yet offered a solution.
Waterson says they are looking at proposals from the Pensions Policy Institute, including introducing income disregard and changing the limits for trivial commutation. But he argues that it is difficult to propose a solution without access to the Government’s model of who will be affected.
Waterson adds that the recent announcement on the delay to auto-enrolment makes the argument even more powerful for bringing forward auto- enrolment into existing schemes, and suggests the Tories may try to bring it forward if they win the next election.