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BeeHive  >  BeeLines  >  Tony Blair’s thoughts on pensions: Take two…

Tony Blair’s thoughts on pensions: Take two…


Well it’s not every day that Tony Blair says anything about pensions.  In fact, he so rarely says anything about my favourite subject that when he does I tend to regard it as an event of national importance.  The last time he mentioned pensions you’ll remember I wrote a whole BeeLine about it.  That’s how significant I thought it was at the time and now he’s gone and done it again and what’s more he’s done it in his annual address at his Party Conference so I guess it’s got to be worth my letting you know about it and what I think he’s getting at.

To be fair, the speech lasted about an hour and only three sentences were about pensions, so it was kind of a nanosecond thing, but it’s still pretty important I think.  What he actually said was in two parts.  His first mention of pensions came early on in his address to the Labour Conference when he said:

“Only a Labour Government would have stopped the scandal of pensioner poverty or introduced the winter fuel allowance.”  1

Now I don’t know about the winter fuel allowance stuff, but the reference to the scandal of pensioner poverty clearly relates to the Pension Credit and I suppose just adds more political capital to the overall concept of means-testing for the elderly.  We shouldn’t be surprised by that, it’s kind of a flagship idea that’s central to much of what’s been going down in pensions for most of the last decade now.

Means-testing has been highly effective at getting weekly cash to millions of the most hard-up pensioners in the UK and my take on what’s being said here is that it will continue as a main policy of the Labour Government into the future.  The problem with means-testing, of course, is that while it undoubtedly helps those currently retired it acts as a disincentive to saving for those still at work at the same time.  It’s a double edged sword, kind of a pensions Catch 22 sort of thing.  It’s tricky, but we all have to accept, I think, that the Government is committed to means-testing because it works today.  Tomorrow’s not as high on the agenda as today.  I doubt it ever will be.

Over time, of course, when we’re living in tomorrow, some of this will catch up with us.  The number of people without pension savings of any real significance is stuck at around the 12 million mark, about half the working population of the UK 2.  So the number of people without adequate pension savings hitting retirement in the future is going to increase big time.  At the same time, government projections show us spending the same on state pensions as a percentage of GDP over the next 20 years or so as we do now (about 6.2% of GDP I think) 3.  If future policy remains as it is now with means-tested benefits skewing ever dwindling resources (in real terms) towards those most needy in retirement then the losers look to be those caught in the middle.  These will be people who will be too rich to be classified as being poor, but too poor to be classified as being rich.  They’ll be the ones who’ll feel the pinch I guess.  They’re also likely to be the losers as occupational pension schemes continue to decline in the future and unless some way can be contrived so that workplace-based schemes can undergo some kind of revival, they’ll be left out in the cold pension-wise for sure.

The second thing Tony Blair said in his speech relates to this group and this problem, or at least it seems to do so to me anyway.  What he said was this:

“In December, we receive the report of the Pensions Commission. Next year we will publish our plans for reform.

There will be a proper basic state pension; and alongside it, because, in the modern world the state cannot provide it all, a simple easy way for people to save and to reap the rewards of their savings.”  4

The first point about a ‘proper’ basic state pension doesn’t surprise me and probably won’t seem odd to regular BeeHive readers either.  It’s an open secret that the way the basic state pension completely fails half the workforce (women) is unacceptable in the 21st century.  In my book it was just as unacceptable in the 20th century too, but that’s all water under the bridge now and moaning on about things that didn’t happen isn’t particularly helpful.  It’s good to hear the top guy in government saying that we haven’t got a ‘proper’ basic state pension at the moment though.  That’s something at least.

The second point, that of the Government providing a simple and easy way for people to save and ‘to reap the rewards of those savings’ interests me greatly.  Being rewarded for saving is just what we need if we are to get pensions to the half of the working population who at the moment have no prospect of them.  If by that he means that every pound people save will make them at least one pound better off than non-savers then I’ll be delighted.  We’ll at last be getting somewhere if we can get round the disincentives caused by means-testing in some way.  Hopefully, this is what he’s hinting at.  Time will tell I guess…..

Steve Bee

28 September 2005

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1 & 4. "We are the change-makers" - Speech by Prime Minister and Leader of the Labour Party Tony Blair, to the Labour Party conference, Brighton, Tuesday 27 September 2005.

2 & 3. The Pensions Commission, Key Facts from the First Report of the Pensions Commission, October 2004.