A future Conservative administration would make drastic changes to pension personal accounts to eliminate the dangers of means-testing if the Government refuses to budge.
Speaking to Money Marketing at the Conservative conference in Blackpool on Tuesday, Shadow Work and Pensions Secretary Chris Grayling said the Tories would not scrap personal accounts and “start again from scratch” but would remove the disincentive to save created by means-testing.
The statement throws into doubt the political consensus that the Government says is necessary to achieve progress with its pension reforms.
At last week’s Labour conference, pensions minister Mike O’Brien said he did not see means-testing as a major problem area and recently branded as “bizarre” arguments suggesting that means-testing would undermine the scheme.
But Grayling says by ignoring the dangers of means-testing, the Government has failed to answer one of the most fundamental questions surrounding the reforms. He says: “They have got teams of people working on an answer to it, so will they please answer it.”
Grayling says it is clear that some people will derive no benefit from the scheme or have their savings effectively cut by means-testing and the publicity that would accompany this would act as a disincentive to save for the target market.
He says: “We will not come into office and rip up everything but we will have to address the issue. We will not start from scratch and walk away from personal accounts but we will have to modify what is there to make it work. If the Government does not explain itself and make important changes, then when we get into power, we will have to do some rapid sorting out.”