On September 7, the Liberal Democrats announced a comprehensive set of pension policy proposals for their annual conference.
Even if you doubt whether the LibDems will win the general election this is important because the other parties have time to steal the best bits and incorporate them into their own pension policy for the general election.
In the best Liberal tradition, the proposals are radical. They would phase in a Citizens Pension based on residency in place of a state pension based on National Insurance contributions records.
By setting the Citizen's Pension at the level of the guarantee credit (currently £105.45 a week for single pensioners and £160.95 a week for couples) they would lift recipients out of means-testing. Initially, their Citizen's Pension would only apply to the over-75s on grounds of cost but eventually all pensioners would move to this system.
There would be a “no worse off” guarantee during the transition. The residency requirement might be “20 years spent in the UK since the age of 25” and payment would continue provided the person was resident anywhere in the EU or in another country with which the UK has a reciprocal agreement.
The LibDems have long advocated a permanent Independent Pensions Authority, which would take many of the decisions about pension policy out of the party political arena. It could look, for example, at raising the state pension age.
The LibDems are particularly concerned about women in their 40s and 50s who are on track for a very low state pension and a LibDem government would give such women the chance to top up their National Insurance contributions retrospectively.
This suggests that it would be a long time before the phasing in of Citizen's Pension reached women who are in their 40s and 50s today since otherwise they would be at risk of paying for nothing.
It may be inferred from the LibDems' pension policy paper that they do not think very highly of the way that pension advice currently operates. They advocate a strong new arm of National Savings and Investments to be called National Savings Pensions (NSP). One of the claimed advantages of NSP is that it would let small savers avoid “suffering middlemen's excessive charges”.
They also advocate a series of generic services through local Citizen's Advice Bureaux or other local information pro-viders. These local advice centres would, the LibDems claim, need government backing if they were dispensing pension advice, to “avoid crippling ins-urance premiums covering them against wrong advice”.
So it looks like the commercial providers would be competing against National Savings on an unlevel playing field and IFAs would also be competing against state-subsidised advisers on an unlevel playing field.
One proposal which will appeal to many pensions IFAs is the abolition of the requirement to buy an annuity by the age of 75. It is not clear from the document how this would differ from the current government's alternatively secured pension which comes in on April 6, 2006.
In order to help older people to effect career changes, the LibDems would allow those aged over 55 to secure a student loan against their house or other assets to enable them to study. This could produce some interesting situations if the retraining exercise did not lead to the paid work which had been intended. An unserviced student loan for an oldie could be equity release by another name.
Towards the end of the paper, the LibDems have a short section on the taxation of pensions. At present, they say, half the money spent on tax relief goes towards just 2.5 million higher-rate taxpayers. They would not change this immediately but instead they would “encourage the Independent Pensions Authority to review tax relief to fund a fairer system”.
The LibDem paper is full of proposed changes to the current systems for both state and private pensions. Bearing in mind how many people who actually vote are in or near retirement, pensions must be a key battleground for the general election. The LibDems clearly hope this will be a winner for them.