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Verity&#39s view

Almost everyone reading this column is bound to be able to remember at least one person in their past, most likely from their time at school, who used to want everyone to think they were “hard”. They would talk in tough language, make tough facial expressions and generally try to act like Vinnie Jones. It was, of course, a sure sign that they were anything but.

This Government behaves exactly like that when it talks about being “radical”. When Tony Blair first came to power five and a half years ago, ministers commissioned a report on what to do about Britain&#39s pension system.

Tom Ross from Aon Consulting chaired this pensions provision group, with Stewart Ritchie and other great and good types from the pension arena. Its report, We All Need Pensions, was an excellent summary of what was going wrong but it could not make recommendations.

The Government, then represented by the likes of Chris Smith and Harriet Harman, promised a “radical” response. Since around 1995, these normally intelligent people had spoken of their plan for stakeholder pensions.

Apart from borrowing the “stakeholder” phrase from the economist Will Hutton&#39s book The State We&#39re In (where the word had to do with allowing workers and customers to share the control of companies with shareholders), they did not seem to know what on earth their new pension would be – just that it would be radical.

Frank Field was appointed to “think the unthinkable”. He had already done some truly radical thinking – and even had it costed by the Government Actuary – in his book, written in Opposition, How to Pay for the Future.

If there was ever a hope of radical thinking on pensions, it was through Field&#39s plans for a state-sponsored compulsory, funded pension

For being so radical he was, naturally enough for this Government, given the sack.

Pension gurus could not see what “stakeholder” would mean. Defined benefit or money purchase? State or privately run? Months of consultation later, we all held our breath while some cynics suggested it would simply be a personal pension or group personal pension by another name, perhaps with prescribed charges. No, said the likes of John Denham, then pensions minister, it would be more radical that that.

As it turned out, of course, the new pensions were about as radical as a Cat standard. Stakeholder pensions were just a personal and/or grouped personal pension by another name, with charges of no more than 1 per cent a year.

Just as the industry predicted, few people in the target group have taken them up because no one can afford to persuade them, whether through advertising or direct sales, to do so.

Again, earlier this year, when everyone began talking about a pension crisis, the call went up for “radical action”. The Government, throughout this year, has avoided taking any action at all, or even saying what it would do, by referring us to the imminent Pensions Green Paper.

As more and more employers (exceptions – the Civil Service and the Financial Services Authority) have closed their final-salary schemes to new recruits, and some have simply wound up their pensions altogether, the Government has referred us to the Green Paper.

As it has become clear that stakeholder pensions are, for most people, either just replacements for their older, superior final-salary pensions – or worse, just boxes of life insurance company leaflets gathering dust in their employer&#39s filing cabinet – we have been referred to the Green Paper.

As it has become clear that no one understands Gordon Brown&#39s newly extended welfare system, where nearly half of all pensioners will have to write their life on a bit of DWP paper to claim a few quid of pension credit, we have been referred to the Green Paper.

It is fairly clear from what the now Work and Pensions Secretary Andrew Smith has said that not only is this Government not going to introduce or extend compulsory private contributions, it is also not willing to raise the retirement age, nor to restore the basic state pension to a decent level.

Now if this consultation was actually a consultation, rather than a convenient way of kicking political problems into the long grass, something radical would indeed come out of it.

Almost everyone of note contributing to the consultation is advocating a similar solution.

The National Association of Pension Funds, along with thinktanks such as the IPPR and the Pensions Policy Institute (an offshoot of Tom Ross&#39 inquiry) all want the basic state pension upgraded to restore it to being a decent, basic level of pension, lifting pensioners above subsistence level as of right rather than forcing them to go cap in hand to the DWP after a lifetime of National Insurance contributions. Paying for it is cost-neutral if the Government scraps the state second pension and raises the retirement age. And some form of compulsion on employers, or at the very least some much more effective system of incentives, is needed to shore up occupational pension provision.

It very nearly amounts to a consensus of groups within the pension industry wanting the same “radical” solution to the pension problem. For all the Government&#39s talk of being “radical”, it is clear it intends to do nothing of the sort.


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