When Steve Webb was interviewed by Retirement Strategy last November, he surely could not have believed he had the slightest chance of becoming pensions minister six months later. From the safety of eternal opposition, politicians are free to promote idealistic policies without being reined in by concerns over costs or other pesky practicalities that civil servants may come up with.
So it is encouraging to see that in the short time Webb has been in his role, he has stuck to the principles he espoused in opposition. His fingers are all over the coalition’s plans for greater flexibility around accessing pension savings and the speedy uprating and “triple-locking” of the basic state pension. He has stuck to his support for a citizens’ pension, albeit as a long-term objective.
His recent BBC Moneybox comments warning that a fixation with costs leads to a Government “cursed with incrementalism” points to a man still firmly pushing for a citizens’ pensionquite a radical position for a Government minister to take.
Webb has long campaigned for a citizens’ pension around the level of pension credit for everyone meeting a residency criteria. However, the LibDems removed this from their manifesto due to the economic climate. And here is Steve Webb’s first big ministerial headache. Before the election Webb warned that Nest would be undermined if the Government did not address concerns about the scheme’s interaction with state benefits.
Further increases to trivial commutation levels, or reducing the scope of the scheme, could help address these concerns but these options have their own costs or drawbacks and the simplest way to address the means-testing question seems to be a citizens’ pension.
As this is off the table, at least in the short term, Webb needs to make his intentions for the scheme clear as soon as possible. A quick review of Nest has been promised by Webb and you would hope that means-testing concerns will be addressed as part of this.
A much less welcome idea from Webb would be scrapping higher-rate pension tax relief.
The coalition has yet to make a decision but the cost savings must make it an attractive option. A safer political move, but equally unwelcome, may be to significantly lower the threshold at which individuals stop receiving higher relief. If levels of relief have to be reduced further, perhaps a more sensible option would be to reduce the annual allowance.