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BeeHive  >  BeeLines  >  What’s Buzzing in Pensions? Early November 2005

What’s Buzzing in Pensions? Early November 2005

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Well, in answer to the title of this BeeLine, what isn’t buzzing in pensions at the moment?  I guess we always knew that the run up to A-Day would be pretty fraught, but I didn’t really think so much would be going on at the same time as we are seeing at the moment.  This BeeLine, like others in the series, is kind of a sweep-up of all the things that have come up in the last couple of weeks or so that I didn’t have time to write into complete BeeLines of their own.

 

New Secretary of State for Work & Pensions

I know you already know by now that David Blunkett resigned last week and that he was replaced as Secretary of State for Work and Pensions by John Hutton.  By my reckoning this makes Mr Hutton the 13th holder of a cabinet level pension job since 1997 - hopefully 13 will be a lucky number!

In case you’re interested I’ve got hold of some background on the new minister for you 1:

Political Background

John Hutton is now the Secretary of State for Work and Pensions.  He moved from the post of Chancellor of the Duchy of Lancaster. 

Hutton is viewed as a loyal Blairite, pragmatic and pro-European.  Many see him as a potential leadership candidate post-Brown. 

Personal Background

Born on 6 May 1955, Mr Hutton was educated at Westcliffe High School and Magdalen College Oxford.

Prior to being elected an MP, John was a Senior Law Lecturer at the University of Northumbria.

John’s hobbies include football, cricket, films, music and history.  His special political interests are Legal Affairs, Welfare State, Defence and Home Affairs.

He is married with three sons and a daughter.

Political Career

Hutton contested Penrith and the Border at the 1987 general election.  He has been the Member for Barrow and Furness since 9 April 1992 general election.

Since the 1997 election John has made steady progress through the ranks of Government holding a number of varied posts. 

As PPS to Margaret Beckett when she was President of the Board of Trade and Secretary of State for Trade and Industry 1997-98, and subsequently President of the Council and Leader of the House of Commons 1998;

At the Department of Health he was Parliamentary Under-Secretary of State for Health 1998-99 and Minister of State for Health 1999-2005;


And finally Chancellor of the Duchy of Lancaster and Minister for the Cabinet Office 2005 before becoming Secretary of State for Work and Pensions 2005 last week.

John Hutton has his own website too and if you want to you can get to it by following this next link:

John Hutton, MP - Website

Also - if you’re interested in cabinet reshuffles as a topic in itself you may be as fascinated as I was to visit this next website that the redoubtable Ms Bruun found while she was researching this stuff for us.  The Ministerial Whirl (there's a link on the right side of the Public Whip homepage) is one of the best things I’ve seen for ages…

Public Whip

PW9869

 

DWP Research on Workplace Pension Distribution

The Department for Work and Pensions has been busy lately.  It has just published the findings of a piece of research carried out to test the effectiveness of different methods of providing pensions information in the workplace where employers pay nothing, or very little, towards their employees’ pensions.

A pilot scheme was put together among employers paying either nothing or less than 3% of salary into company Stakeholder pension schemes for their employees and was designed to look at the effect such a pilot could have on employees’ pension knowledge, attitudes, awareness and savings behaviour.  The data collected also covered the experiences of the employers, pension providers and Independent Financial Advisers involved in the pilot scheme.

The whole thing ended up painting a pretty downbeat picture of the realities of distributing, or even getting people interested in, pensions where employers aren’t financially committed to them.  Overall the project identified no significant impact on pension knowledge or attitudes towards pensions.  There was also no impact on employees’ perceptions of the security of pensions in general, nor any on the need to start saving.  Indeed, over half the employees surveyed couldn’t even remember having even seen the pilot Pension Information Pack.

The general view of the employers, providers and advisers involved was that the workplace is the appropriate place for pension communication, but views differed on the value of contributions from employers.  Nearly all the employees surveyed thought employer contributions would act as a catalyst for action on their own part.  The employers, however, were opposed to the idea on cost grounds, either because they did not see their employees’ pension arrangements as being their responsibility, or because they didn’t think there would be recruitment or retention benefits. 2

None of that will come as any surprise to anyone reading the BeeHive I suppose, but if you’d like to read the whole report you can get hold of a freely-downloadable copy by following this next link:

DWP - Workplace Pension Distribution

80percent 9823

 

Saints Alive!  It’s the end of Pensions!!

Now, here’s a different one.  The Centre for Policy Studies has put out a new report calling for pensions to be abolished.  The idea would be for pensions to be replaced with a simpler savings wrapper (is that a buzzword these days or what?) which the authors claim could increase not only the amount people currently save, but also increase the number of people saving too.

This new proposed savings vehicle is referred to as a Self-Administered Investment Trust, or a SAINT for short (although it’s not that clear why the ‘N’ is in there).  The proposal is that savers would not get any tax relief when investing, but would get all returns and gains free of tax.  So, a switch from the current Exempt/Exempt/Taxed (EET) pension system to a new Taxed/Exempt/Exempt (TEE) savings structure.

Apparently this could not only be more equitable than the current pension arrangements, but would result in a net gain to the Treasury of £6.8 Billion a year if savings patterns remain as they are at the moment. 3

SIPP 9817

 

Women and Pensions

One of the last things David Blunkett did while he was in charge of the DWP was to oversee the publication of a whopping 151-page report on women and pensions.  It points out that women are not only less likely to have a private pension than men, but that many women also miss out on a full state pension too because of the way the state scheme acts against them.  BeeHive readers will know that this is something I’ve been going on about for ages and looks to be one of the key pension issues the Government will need to address following the Pension Commission’s report later this month.  Basically the National Insurance system just isn’t delivering fair outcomes and that has to be fixed.

This report is clearly a big part of the preparation for the debate to come and must be seen as indicative of the position the Government intends to take on this big issue.  Some of the stats coming out of the report 4 are shocking really:

  • Only 23% of women retiring at 60 get a full basic state pension
  • Of those only 17% did it under their own steam through their own contribution record
  • The other 6% qualified for a full basic pension through their husbands’ contributions
  • Women comprise around 2.2 million of the 3.3 million people in receipt of the means-tested Pension Credit
  • If the qualifying number of contributory years for the state pension were to be reduced from 39 to 25 the majority of women would become entitled to a full state pension

If you’d like to get hold of a full copy of the report (and you’ve got a full ink cartridge in your printer) you can get a downloadable version of it by following this next link:

DWP - Women and Pensions, The Evidence

Question 9824

 

Public Sector Pension Changes

On the 18th of October the Government reached an agreement with the public sector unions that will mean new entrants to the biggest three public sector pension schemes will now have to retire at age 65.  You’ll be aware I guess that there has been the mother of all rows going on for most of this year about the Government’s wish to move all public sector employees from a retirement age of 60 to 65.  That hasn’t gone the Government’s way and they’ve pulled back from this twice this year already (once just before the election, and again a few weeks ago).

They’ve reached agreement as far as new employees are concerned though.  The deal now is that for the three big schemes, the NHS, Teachers and the Civil Service, a normal retirement at age 65 is all that’ll be on offer for new entrants.

Because of this watering down of the original proposals the difference in normal retirement ages between the private and public sectors will last longer than it would have done if age 65 had been imposed on existing staff too.  (In the private sector age 65 is already the norm.)  Over a long time things will gradually equalise, but clearly for many years to come there’s not much in this new agreement that will do anything to get rid of the common perception of the growing divide between public and private pension provision. 5

Generous

PW9856

 

Steve Bee

9 November 2005

Any research and analysis included has been provided by us for our own purposes and the results of it are being made available only incidentally.

Sources:

1. www.johnhuttonmp.co.uk

2. DWP: Research Summary - 'Providing pensions information and advice in the workplace where there is little or no employer contribution' by John Leston and Margaret Watmough. Research Report 294, November 2005.

3. Centre for Policy Studies: 'SAINTs can get Britain saving again' by Charles Elphicke, November 2005.

4. BBC News: 'Women warned over state pension', 2 November 2005.

5. Department of Trade and Industry press release: 'Agreement reached on Public Sector pensions', 18 October 2005.