Pensions and party politics have never been comfortable bedfellows. Pensions, by their very nature, need long-term solutions whereas the governing party can never see beyond the next election.
So when Tony Blair took to the lectern before the party faithful in Brighton last week and touched on pension issues, I was minded of that uneasy relationship.
What the PM said was along the lines of only a Labour Government would have stopped the scandal of pensioner poverty.
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 should not be surprised by that. It is kind of a flagship idea that is central to much of what has been going down in pensions for most of the last decade.
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 was being said in Brighton is that it will continue as a main policy of the Labour Government into the future.
The problem with means-testing is, of course, 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 is a double-edged sword, a pensions Catch 22 sort of thing. It is tricky but we all have to accept, I think, that the Government is committed to means-testing because it works today. Tomorrow is not as high on the agenda as today. I doubt it ever will be.
Over time, of course, when we are 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. 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 per cent of GDP). 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 will be the ones who will feel the pinch, I guess. They are 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 will be left out in the cold pension-wise for sure.
That was not the only mention of pensions in Mr Blair's speech. He also made reference to the plans for reform to the pension regime. He said that there will be a "proper basic state pension" and alongside it "a simple, easy way for people to save and to reap the rewards of their savings".
The first point about a "proper" basic state pension does not surprise me. It is an open secret that the way the basic state pension completely fails half the workforce (women) is unacceptable in the 21st Century. It is good to hear the top guy in government saying that we have not got a "proper" basic state pension at the moment, though. That is 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 £1 people save will make them at least £1 better off than non-savers, then I will be delighted. We will at last be getting somewhere if we can get round the disincentives caused by means-testing in some way. Hopefully, this is what he was hinting at. Alas, with all these things, only time will tell.
First published in Money Marketing, 13 October 2005