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Pension reform needs public support - Purnell

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  • By Nyree Stewart
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The government has accepted the concerns of opposition parties on pension reform but warns any consensus will have to be accepted by the public.

Speaking in Edinburgh at a conference on the pensions white paper hosted by Scottish Widows, James Purnell, Minister for Pensions Reform, says a debate last week in the House of Commons, brought up many issues and concerns, which the government have accepted.

But he warned while there may be a “nearly sickening display of consensus” in Westminster, the government still needs to get the public on board, particularly over the controversial raising of the state pension age.

He says the central goal of the white paper is to help workers to take personal responsibility for retirement as millions are not saving enough, but he says the government is not telling people they have to save, as it is their choice.

But he warns if the savings culture doesn’t change, in 20 to 30 years there will be many pensioners who will be poorer than they expect, or who will have to work much longer than the state pension age regardless of what level it is at.

Purnell argues public understanding and acceptance of the reforms is vital to changing the way people think about retirement, but he says this cannot be achieved overnight, as “a soundbite doesn’t change anyone’s mind”.

However he says the government is pleased with the way public opinion has shifted over future reforms since the publication of the second Pensions Commission’s report in November.

He says the report made it clear there were limited options if people want to avoid being poor in their retirement, and the National Pensions Debate, which took place across the country in March, has helped make people aware of the trade-offs between a higher state pension age and a more generous income.

Purnell points out during the events in March, those in favour of raising the state pension age increased from 42% to 56%, but he admits the reform is “still a controversial issue”, particularly among MP’s whose constituents suffer from below average increase in longevity.

And despite the results of the National Pensions Debate, a recent survey by B&CE Benefit Schemes, published this week, reveals over 60% of workers are still not happy with the idea of working longer before they can retire.

However the Minister argues while he understand these concerns, by 2026 the first group of pensioners to retire at age 66 could expect on average to live for another 24.5 years, and even those from they lower socio economic group would still spend a greater proportion of their life in retirement than they do now.

But he admits the argument is not won yet, as although the National Pensions debate involved thousands of people, “over the next few months and years, we will need to extend that debate to millions”.

As a result Purnell says over the summer and when the government introduces the legislation, it will be “seeking to engage with the public so we can continue to base our policy on their views”.

He also says more work will be done to resolve concerns raised by the opposition parties in the House of Commons last week, which highlighted the work needed to be done on:

  • The interaction between means testing and savings incentives
  • The design of personal accounts, and how automatic enrolment would work
  • The need to strengthen occupational pension provision, and the risk of levelling down
  • And the need to restore the fairness of and confidence in the security of the pensions system

Purnell says the government plans to publish its research on the incentives to save, which covered public attitudes and economic modelling, to show both the public and parliament why it believes the vast majority of people will be better off saving in personal accounts.

But he points out the precise design of personal accounts was one of the parts of the white paper which was “deliberately left greener” so it can base its decisions on a further round of consultation with “other parties and with stakeholders to get the decisions right”.

The Minister also reiterated his aim to hold a pensions summit in July, and to publish further research on the issue of auto-enrolment and personal accounts.

If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]

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