Steve Webb interview: Cultural shift in retirement expectations required

14 April 2011 12:00 pm | By Tom Selby

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Steve Webb: Having a bit of a track record, as my views on certain subjects are well known, actually helps because people know where I stand and we can just get on with it

Pensions minister Steve Webb says Government plans to link the state pension age to life expectancy will include a mechanism to give people certainty about their state pension date as they approach retirement. The Governments green paper on state pension reform, published on April 4, put forward two options for linking the state pension age to longevity. The first would see the introduction of an automatic formula while the second would involve regular reviews of UK longevity by an independent body. Speaking to Money Marketing, Liberal Democrat MP Webb sought to allay concerns that removing the set retirement date would leave people with a moving target. He says: We are moving into a world where the notion that the state pension age is fixed has got to go, that is implicit in the green paper. Clearly, there has to come a point in your life when you know what your state pension age is going to be. The challenge is how far, how fast and on what basis you adjust it prior to that and then at what point in someones life you say, regardless of what happens, this is your state pension age. But in my mind, I would assume there would be such a date.

However, Webb says there will need to be a cultural shift in retirement expectations as the Government seeks to abolish the current system where policymakers set an ad hoc state pension age. He says: We need to culturally shift to a view where frankly people recognise we cannot have a definite answer on the question of when they will retire because we do not know whats going to happen to life expectancy. You will know what ballpark you are in but you wont know exactly. There is a lot of work to do in communicating that idea to the public because the age of 65 is so hardwired into the nations psyche. Getting rid of the default retirement age helps because that iconic 65 is taken out of the system. Whichever option the Government chooses will inevitably see an acceleration of the timetable for increasing the state pension age to 67 and 68. Under current plans, the state pension age will rise to 67 in 2036 and to 68 in 2046. Webb says: The Secretary of State has already said the timetable for 67 and 68 needs to be reviewed. We could have put the 67 date in the green paper but it would have been a bit odd to say, here is a rational, non-ad-hoc process but here is another date we have plucked from the air. The introduction of a more automatic mechanism for calculating the state pension age was presented alongside options for fundamental reform of the state pension payment. The green paper puts forward two potential reform options. The first is an acceleration of the previous administrations plans, so the state second pension would move to a flat rate by 2020. The second more radical option would see the introduction of a single-tier state pension of around 140 at todays prices for future retirees. Webbs comments in opposition suggest he would prefer the more radical proposal but he insists the outcome of the three-month consultation is not a foregone conclusion. He says: It would be wrong of me to pre-empt a consultation thats only just been published. But I think there is a question about whether you go for incremental change or a big bang, because there are aspects of a big bang that have a big impact. In opposition, it is easier to be clean cut about it but I think there is a legitimate question about whether to go for incremental change or a big bang. Webb has long viewed state pension reform as a cornerstone on which private sector saving can be built. With the intention to simplify the system now clear, his other immediate focus will be ensuring that automatic enrolment and Nest are rolled out as smoothly as possible. If the Government is successful in this aim, Webb argues that the small businesses its reforms are targeting should not need to take financial advice. He says: Our goal is that, particularly with the smallest firms, they will feel able to choose Nest and get on with it and will not feel they need to pay for financial advice. A lot of employers we will be dealing with will never have dealt with pensions at all, so we are aiming to make their lives as simple as possible. We want to make sure, particularly through Nest, that it is

relatively painless and that they are confident that it is an appropriate thing to do and they can get on with running their business. In pursuing its urgent reform agenda the Government has been widely praised for its willingness to listen to the pension industry during consultation. However, in May last year former Labour pensions minister Malcolm Wicks warned Webb of the deep vested interests of the industry. Webb insists throughout these discussions, and in any subsequent policy decisions, that he remains on the side of the consumer. He says: I see myself very much on the side of the consumer because they are the individuals who elected me. But I think there is a shared interest in quality financial products, so I do not see these things as a battle. There are times when my agenda and those of the organised lobby groups do not agree, and that has happened in the last 11 months but very often it has been constructive, collaborative and supportive. In opposition, Webb held strong public views on a number of pension issues. He has previously criticised Nest and was a keen promoter of early access to pensions, a policy that the Treasury has recently consulted on. He says: I think having a bit of a track record, as my views on certain subjects are well known, actually helps because people know where I stand and we can just get on with it. You have always got to be aware of the vested interests but I have not particularly sensed a problem so far.

Slovene opposition would soften retirement age changes-INTERVIEW

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Thursday February 03, 2011 01:38:15 PM GMT

SLOVENIA-OPPOSITION/ (INTERVIEW) * Present reform has little chance of being enforced * Reducing debt would be main task of future government * Country credit rating could fall By Marja Novak LJUBLJANA, Feb 3 (Reuters) - Slovenia's opposition will roll back some of the current government's pension reform if, as polls show, it wins power in elections next year, party leader and former prime minister Janez Jansa said. The reform is part of the current administration's efforts to rein in future public spending after its debt jumped to 38 percent of GDP in 2010 from just over 22 percent in 2008, mainly because of measures to diminish the effect of the global crisis. Even if the law survives a threatened referendum, Jansa's centre-right Slovenian Democratic Party (SDS) will rewrite it to raise the retirement age for fewer Slovenians, seeking instead to rebalance the system by raising revenues from future generations, he told Reuters in an interview. He also said his government would seek to raise investment incentives in the European Union member and cut the tax burden on companies to generate more new jobs and add to the revenue base for the system. "The key reforms for Slovenia are measures that will ensure new jobs; every new job is a step towards stability of the pension system," said Jansa, who was Slovenia's prime minister from 2004 till 2008.

Jansa's SDS has been leading opinion polls for more than a year as a slow economic recovery and rising unemployment drove the popularity of the centre-left government to a record low. The next parliamentary election is due in September 2012. Parliament passed a law in December that gradually increases the pension age to 65 for all from 57 for women and 58 for men as a cost-cutting measure. The law was supposed to take effect in January but has been put in doubt after trade unions demanded a referendum. Governments across Europe, many of them mired in the sovereign debt crisis, are raising retirement ages under long-delayed reforms of pensions to deal with a general ageing of populations that has added to the burden on public finances. SUSTAINABLE The Slovene government in turn last month asked the Constitutional Court to rule on whether such a referendum was possible, claiming the reform was necessary to ensure sustainability of public finances in the long run. The court is due to rule this month. A recent opinion poll showed that as many as 63 percent of Slovenians oppose the reform while only 28 percent support it. "The pension reform is not a proper reform but only corrects the existing system," Jansa told Reuters. Even if the pension law is enforced, which is not likely, the next government will have to adopt a proper reform." Jansa said any change should aim to attract young people into the system sooner and should only selectively increase the retirement age so that those with difficult physical jobs would be able to retire earlier. The next government should also slim down public administration, reduce red tape and speed up privatisation to improve Slovenia's competitiveness and raise growth, he said. Slovenia, the euro zone's fastest growing country before the 2008 crisis, saw its economy shrink by 8.1 percent in 2009. The government expects growth of 2.5 percent this year after growth of about 1 percent in 2010 but the jobless rate is seen increasing further in the coming months after it jumped to 11.1 percent in November from 6.7 percent two years ago. (Editing by Patrick Graham and Toby Chopra)

Retirement: interview with Ros Altmann, director general of Saga

Peter Crush, 11 Oct 2011

Depending on what you read, Dr Ros Altmann, who was an adviser to the Number 10 Policy Unit and an ex-Chase Manhattan banker, is either a thorn in [Gordon] Browns side or an indefatigable campaigner for justice.
Spotting the crisis signs for retiring workers earlier than anyone else (she set up Pensions Action Group in 2004 and is credited with pressurising Parliament to vote for the establishment of the Pension Protection Fund), the current director general of over-50s group, Saga, has been brow-beating governments ever since. She has taken on the causes of everyone from Allied Steel workers to Equitable Life policy-holders (some 30,000 of whom have sadly died without ever getting their rightful money). But when you meet Altmann, what you find is that pensions barely interest her at all, and that she is far more supportive of being able to work longer and not needing to rely on a pension in the first place. "The first baby boomers hit 65 this year," she says. "But the best decision the Government has ever made has been to remove the default retirement age (DRA)." For, despite being known as a campaigner for better pensions, Altmann has long argued most pensions will not provide any meaningful standard of living, and that longer working is the best answer. In fact, while she welcomes removal of a DRA ["I thought government would keep it, or at best raise it to 70," she admits], the fact it has taken this long still leaves a bitter aftertaste. "Lots of able people were got rid of from 2005 to now, just for reaching 65," she says rancorously - a reference to 2005, when, she says, the Labour administration resiled from voting for removing it. And even now, she fears the coalition has been motivated by other reasons: "There is no doubt that since then, the pensions crisis has naturally introduced the concept of working longer. I don't think the DRA would have gone without a pensions crisis helping it along. Government needs people not to retire now." But despite being pleased the DRA is gone, Altmann is worried workers are in an odd holding-pen of being granted permission to work, but there also being a state pension age - which if it were up to her, would be even higher - and there still being prejudice against older workers. "I have no problem raising the pension age higher," she says, "because we have now got to a position where pension age is no longer retirement age. Pensions are simply paying people not to work. This is not affordable. I'd rather have people working, and for much longer." But, she adds, "employers need to do more to encourage longer working. HR has such a strong role in deciding what people can or cannot do, cutting down hours, and redefining people's roles. But," she says, "it is such an easy option to not do this and get rid of people. It happens all the time. It still happens; it's not supposed to." What is stopping them, she argues, is partly a media-created notion there are millions of young people waiting to be given work, and that older people should step down to give them a chance. "This lump-of-labour-in-waiting just isn't here," she says. She knows the economic crisis and 20% unemployment among the young are not helping matters, but says employers have to focus on the older age group first. "They have most experience and they have the best skills. If older people are encouraged, at their workplaces, to stop working before they want to, we create a nation of

people 'retiring' before they should, of people not having much money, not going out and buying things or going on holiday. This will damage all the businesses that 'do' employ young people. Stopping people working before they want too - even in a post-DRA age - is a recipe for economic decline," she adds. Altmann is still smarting over not removing the DRA in 2005, because it is lost time where culture change could have happened earlier and "the stigma of growing older has been allowed to continue". Despite the actions of many trailblazing businesses to promote older workers, she thinks it will still take time for the abolition of 'retirement' to sink in: "Why are businesses throwing people out? They need to use and encourage talent in a different way." In July, the findings of the Dilnot Commission on Funding of Care and Support looked at the similar issue of care for the elderly, suggesting care costs be capped to ensure people do not lose their hard-earned assets, while also suggesting insurance companies come up with insurance-type products to guarantee an annual income in old age. But Altmann is sceptical of this too. "Dilnot is focusing on delivering care more than funding it, and I don't think you can divorce the two," she says. "You can argue about caps, or thresholds before people pay for it, but the thing is, people that never save money always win, and this isn't fair," she adds. "That is why I come back to the fact that the key for older people is simply not to stop, but to carry on working and paying their way still. That way, there's money to live, work and for care costs." There's perhaps a clue in Saga originally standing for 'Social Amenities for the Golden Age' In all of this, though, there is actually one, large irony she says is playing out: "In many ways, business - the private sector particularly - was sold the idea of early retirement as something their workers should aspire to," she says. "It has been very damaging - that people can work less and that there is a money tree out there to pay their pension. Changes should have been made long ago, but weren't." Altmann sounds pessimistic, but she is at pains to point out HRDs are the best placed to root out these stereotypes. And she closes with what might be seen as a controversial line of thinking: "For me, employers have a much more important role to play in encouraging their staff to work longer, than encouraging them to pay into their pensions," she says seriously. "Without a default retirement age, the main priority is the need to get rid of age discrimination." She adds: "I would much rather HRDs commit to this than pay another 3% into their staff's pensions. Getting people to produce something while being at work is a much better solution than paying people not to work."