You wait all year for a big announcement on pensions, and then three, four or even five come along at once. Pensions professionals can be forgiven for a sense of overload in the last few weeks, with the Hutton report, changes to state pension age in the comprehensive review, a new annual allowance for higher rate tax relief, confirmation of auto-enrolment and Nest and, just for good measure, a plan to introduce a flat-rate state pension above the level of means-tested benefits.
The Coalition cannot be accused of letting the grass grow under their feet.
The last of these, the £140 a week flat-rate pension plan, really is the jewel in the crown, a proposal that would at a stroke make pension saving infinitely more compelling for today’s workers.
While the pace of reform has been breathless, we should not be entirely surprised because Nest and auto-enrolment were already on the way.
That meant the government had a gun at its head requiring it to sort out the means-testing conundrum or see an expensive flagship policy go badly wrong. Fair play to the two parties in the coalition for taking on this latest challenge, rather than simply letting auto-enrolment happen under a means-tested backdrop, and blaming Labour when it went wrong. Given Gordon Brown’s attachment to means-testing for pensioners, it would, in the style of those historical ’what if’ novels, be interesting to see how auto-enrolment would have played out had Labour won the election.
Now the announcement on a flat-rate pension is out there, obvious complexities are plain to see, but it will be a long time before all the issues emerge from out of the woodwork. There will be as many problems for policymakers as there are complexities to UK pensions.
But the prize is a handsome one, and one that could have a radical influence on the UK and its savings culture, adding to the wealth and prosperity to the entire nation. Lets hope they can make the sums add up.