This month will see the return of party conference season and retirement and pensions look to set to feature strongly again. Public sector pensions, the state retirement age, workplace saving and state pension reform have all been hotly debated in Parliament this year but with a lot still to be finalised, these topics will likely dominate any discussions about pension policy.
Cicero Consulting account director Ben Stafford says: “I think it is going to be a fascinating conference season. The parties are united on how to eliminate the inertia the public feels towards retirement saving, so the main question will be if the current consensus on pension policy lasts.”
Stafford does not predict any explosive disagreements. “There is simply no alternative to auto-enrolment and the flat-rate state pension,” he says.
Conservative MP Harriett Baldwin predicts that auto-enrolment will be a hot topic. She says the issue of working past retirement will be discussed in a Policy Exchange debate on intergenerational fairness which she is taking part in.
The Labour party will be focusing more on questions of fairness surrounding public sector pensions and the impact of equalising the state pension age on women and Labour MP Anne Begg believes there will be strong views aired at their conference.
However, Stafford predicts that the conference season will be difficult for Labour because its ties to the trade unions may cloud its stance on public sector pensions. He says: “What Labour’s outlook for public sector pensions is will be the biggest question of the conference.”
However, Stafford thinks one party that will benefit will be the Liberal Democrats.
We want to be sure there are no administrative errors. We need to be clear on the relationship between auto-enrolment and the state pension
He says: “They have a lot’ of strength in this area because they have Steve Webb.”
Liberal Democrat MP Stephen Lloyd says his party will be questioning the fairness of the state pension age equalisation. He says: “It is very much a hot potato for LibDem backbenchers.”
Lloyd also thinks the practicalities of auto-enrolment, especially for small businesses, will be discussed at the conferences as well as how to make sure the flat-rate pension is fair for everyone.
While all three parties agree that a simplified state pension is a positive step, ensuring awareness that a flat-rate state pension is just a foundation will be a big topic at the conferences.
Baldwin says: “It is just the first pillar. A flat-rate model will help but we need to communicate with people too.”
Begg agrees that the hurdles associated with the foundation pension will be a talking point. She says: “People need to know what the Government’s intention is with regards to the state pension before signing up for auto-enrolment. Also, a lot of people thought a flat-rate meant everyone would receive a state pension of £140 a week but it does not necessarily. There will be winners and losers.”
The LibDems will be focusing on the losers. Lloyd says: “The flat-rate is a liberal idea so I am delighted. My one anxiety is that it has to be made restrospective or people will find it unfair.”
One policy area in which the three main parties have formulated their opinions is the change in the state pension age. Labour MP Rachel Reeves has flagged up concerns over women aged 54-57 who are going to lose out because of this and Begg echoes her sentiments.
Begg says: “I do not think anyone objects to the equalisation but half a million women have very little time to prepare. The Government got the bill through the Commons by saying there would be transitional arrangements but we have not seen any.”
Lloyd says the LibDems are also unhappy with the current situation and says: “We are pushing hard for this to be revisited.”
Lloyd hopes that if enough attention is given to the issue at the conferences, the Government will propose to wind back the state pension age in the bill’s third reading.
Baldwin predicts a similar outcome but says the Government is in a difficult situation.
She says: “It would be nice if everyone was asked to work an equal amount of extra time but it will be a tricky thing to implement.”
Stafford agrees that the winners and losers of the pension age change will raise questions for all parties but he predicts the most divisive issue will public sector pension reform.
He says: “The extent to which public sector workers have been saving is a debate in itself. Labour policymakers will no doubt wish they were not quite as tied to the trade unions as they are under a lot of pressure to reverse the proposals.”
While Stafford foresees an internal struggle over whether Labour has abandoned public sector workers, Begg says the Government’s attack on the public sector undermines the whole pension saving process.
She says: “There is real concern around this. The Government says people should save and then undermines a group that has been doing so in good faith.”
Baldwin says the Conservative position on public sector reform remains the same.
She says: “Just like everyone else, public sector workers are living longer. The fairness of what taxpayers and workers put in has certainly got to be looked at. The balance is about 7 per cent from workers and 20 per cent from taxpayers, which needs to change.”
Lloyd says he expects the Liberal Democrats to endorse the same policy as their coalition partners and is dismissive of Labour posturing over the issue, saying Labour’s policies when in power were firmly heading in that direction.
He says: “These changes are necessary. My advice to the Government would be take people being angry on the chin and push ahead. I find Labour’s weasel words ludicrous. They were heading in that direction anyway.”
Stafford says the same applies to many other issues as a lot of the pension reform was set in motion by Labour.
He says: “There are not many chances Labour will have to say, ’This is terrible’ because their fingerprints are all over a lot of it.”
Nest and auto-enrolment are two of these reforms and Baldwin is very positive on the progress made so far.
She says: “The work and pensions select committee visited the Nest headquarters and we were pleasantly surprised by how far down the road they are.”
Although this was a Labour policy, Begg is the most wary of Nest, which Labour will be looking at closely over the next two years. “We want to be sure there are no administrative errors. We need to be clear on the relationship between autoenrolment and the state pension.”
Clear communication is a concern for all three parties when it comes to auto-enrolment.
Lloyd says: “In Australia everyone is talking about their superannuation, from the barmaid to the taxi driver. There are going to be communication challenges but if they do it there then why not here?”
As well as awareness about auto-enrolment, Baldwin also says work needs to be done to raise aware-ness of increases in life expectancy and its effects.
She says: “Increased longevity is an issue. Do we want to ask our young people to work longer to support people in retirement? When I speak about intergenerational fairness, I will look at this.”
This ties in with the debate around working on into retirement, which Baldwin also believes will become a big issue.
Stafford sees opportunities for IFAs here, saying: “There is a major window for IFAs to help people with phased retirement. It should give policymakers at conference a great deal to play with.”
Phased retirement is not the only area Stafford envisages politician-adviser conversations. “For me, the biggest issue should be that of access to advice. With the impending RDR it will be fascinating to see if any of the parties have developed their think-ing on what affordable advice could look like.”
Pensions look set to feature heavily on the agenda this conference season but this is likely to be more in terms of monitoring developments on reforms than explosive disagreement.
Stafford says: “It is likely political parties are going to watch things a bit further before gathering their ammunition for a fight over pensions. But that will come.”
Key issues for Labour
The move from RPI to CPI
Begg says: “We hoped the indexation change was temporary but the billion saved is already in Osborne’s forecast. It is very bad news for pensioners.”
The future of public sector pensions
Begg says: “The big trade unions are feeling very aggrieved. They are unhappy that they are going to lose what they paid in. Keeping their accrued rights is the absolute minimum.”
Key issues for Conservatives
Flexible working into retirement
Baldwin says: “People in retirement should be able to provide for themselves rather than relying on young people. B&Q is a shining example of using retirees with really good skills.”
Eliminating complexity in the state system
Baldwin says: “The flat-rate pension will change the way people think about retirement and make things simpler. It also does away with the psychological deterrent of the means test.”
Key issues for LibDems
The state pension age
Lloyd says: “We are opposing the Government’s position on this because these women suddenly have another two years before they can retire, which seems unfair.”
Making the flat-rate single state pension retrospective
Lloyd says: “It is human nature to get agitated when you think you are missing out. I have spoken with Steve Webb and he is well aware of this issue.”