It’s not often (ever?) you’ll find the Lib Dem leader and the Daily Mail’s Quentin Letts on the same page: their admiration for the pensions minister is the exception to the rule.

The party has produced three infographics that are easy to share via Facebook. Nick’s letter doesn’t link to them, or thank the hundreds who’ve already shared the news of this Lib Dem success in government with their friends — so here are the links for those who want to tell their friends of Steve Webb’s success:

• The Lib Dem pension reforms will bring the self-employed fully into the state pension system;
• The Lib Dem pension reforms will finally mean that women and men are finally treated equally; and
• In government, the Lib Dems are delivering a simple, decent single tier pension of £144-a-week.

This week I want to tell you about my good friend and colleague, Professor Steve Webb.

Steve is the Liberal Democrat MP for Thornbury and Yate, north west of Bristol. There are two things you will know about Steve if you have ever heard him speak. First: he is originally from Birmingham. Second: he is incredibly clever and understands more about pensions than almost anyone else in the country.

A former professor of social policy at Bath University, Steve’s CV includes a stint designing a new pensions system for the Ukraine after the fall of Communism and nearly ten years at the Institute for Fiscal Studies analysing taxes, benefits and pension policy in the minutest of detail.

So you can imagine how I felt, back in May 2010, when I got to appoint Steve as Minister for Pensions in the Coalition Government. It felt like serendipity. There simply couldn’t be a better person in the country to do the job.

And it wasn’t exactly a big surprise when, only a month or so later, Steve came back to say, with a glint in his eye: “I’ve got a plan. Let’s completely redesign the state pension.”

If anyone else said that to you it might be alarming. But from Steve, it was exciting. And after two and a half years that glint has turned into a concrete government proposal to introduce a new, simple basic state pension of £144 a week (up from £107), starting in 2017.

Until now, working out what pension you might be entitled to – and so, whether it was worth trying to save extra for your retirement – was a job for a professor alone. From now on, it will be easy for anyone who can count up to 35 (the number of years it will take to qualify in full) to work out what you’ll get in retirement. And it will be worth everyone’s while to save, because every pound in your private pension will be extra, with no more means testing.

The new system will be especially good for women, low earners and the self-employed, who can be sure of getting a decent pension instead of falling through the many cracks in the old rules.

So when people ask you, “What have the Lib Dems done for me in Government?”, you know what to tell them. You can tell them Vince Cable’s department is delivering more apprenticeships than ever before. You can tell them the Pupil Premium, an idea I wrote about in a pamphlet more 10 than years ago, is putting money into their local school. You can say we’re delivering in April the biggest ever rise in their tax free allowance: a tax cut of £600, a promise that has made it from the front page of our manifesto directly into millions of people’s pay packets.

And now you can tell them that Steve Webb has delivered a pension change that makes it worthwhile to save, and simple to prepare for retirement. It’s a great step forward, and it wouldn’t have happened without us – because it wouldn’t have happened without Steve.

Best wishes,

Nick Clegg

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* Stephen Tall is Co-Editor of Liberal Democrat Voice, a Research Associate for the liberal think-tank CentreForum, and also writes at his own site, The Collected Stephen Tall.

Beveridge’s principles have been subject to a sort of permanent evolution for decades, after successive governments tinkered with the state pension, often with the best of intentions, but always in a way that made things more complicated. Indeed, what we now have is a system so fiendishly difficult that the Pensions Commission declared the UK system as one of the most complex in the world. Only one in four people agreed in a recent survey that they knew enough about pensions to decide with confidence about how to save for retirement. The reasons for this uncertainty are easy to see.

In Britain today we have not one but two state pensions. We have a basic state pension of £107.45 per week that even the Government doesn’t think is enough to live on. Then there is the additional pension (variously known as SERPS or the State Second Pension), a scheme with variable amounts paid out in retirement according to past earnings but with the chance for people to opt out into a company pension scheme. Even these two pensions together are often not enough to live on, so millions of pensioners receive a further means-tested top-up called the pension credit, and even this has different elements (the ‘guarantee credit’ and the ‘savings credit’) each with its own rules, premiums and tapers. It is little wonder that people think they need to be Einstein to know what they will get in retirement. Worse still, the current system actually discourages some people from putting anything aside; the mass reliance on means-tested benefits leaves people unsure whether they will benefit from the savings they make. But it doesn’t have to be like this.

Wouldn’t it be better if people who had contributed through their lives, either through paid work or caring or in some other way, could be guaranteed a pension clear of the basic means-test, a foundation on which they can build? That is what Liberal Democrats have been campaigning for decades to deliver, and today we have published radical plans for today’s workers to retire on a single, simple, decent pension. Back to the Beveridge model, but updated to reflect modern working patterns and modern patterns of life, with a particular focus on treating men and women the same for the first time.

This new ‘Single Tier’ pension is something that has much in common with the long-cherished Liberal and Liberal Democrat goal of a Citizen’s Pension. The basic idea is that someone starting work under the new ‘Single Tier’ pension rules will build up just one state pension. It will be set above the level of the basic means-test (currently £142.70 per week) and the full rate will be payable for 35 years of National Insurance Contributions. As happens now, there will be credits for those who cannot contribute to their pension because of caring responsibilities, and the new rules will particularly benefit many older women whose time at home with children in previous decades has damaged their state pension entitlements. Each individual will qualify for a pension in their own right, with no complex rules about claiming pensions based on someone else’s contributions. Because the new ‘Single Tier’ pension is set above the basic means-test, money you put aside from working to top up your state pension will be far less likely to be clawed back through Gordon Brown’s intricate means-tested benefits system.

If you are already drawing a pension before the start of the single tier state pension, you will continue to get your pension under the current rules. If you start to draw a pension after the single tier is brought in, our starting point is what you have already built up. That means all the pension rights that you have built up will be honoured.

Single Tier isn’t about spending more money on pensions – it is about spending in a clearer, simpler way to better support private saving. That is why the overall cost of the new system will be the same as the system it replaces. The higher flat pension is affordable because people no longer build up very large earnings-related pensions from the Government. So Single Tier will not be a king’s ransom, but it will cover the basics. It will treat men and women equally for the first time and will value unpaid caring work just as much as a high-flying city job. That is why the big winners from Single Tier will be women, carers and some low earners who haven’t previously received much in the way of earnings-related state pension. And for the first time ever, we will be bringing the self-employed fully into the state pension system.

When the Liberal Democrats first entered Government, our priority was to protect today’s pensioners. That is why we introduced the triple lock guarantee to ensure that the value of the state pension will always rise by whatever is higher of inflation, earnings or 2.5%. That meant that last April we were able to deliver the biggest ever cash increase in the state pension of £5.30 a week and this April will pay an above-inflation increase in the pension. Now we are also tackling the needs of future pensioners and delivering a simple, single decent state pension – something Liberal Democrats have argued for over decades. Delivering it would be a truly radical reform, and one that Liberal Democrats could be proud of.

You can read the executive summary at the DWP website.

Danny Alexander has confirmed that the Coalition’s single tier pension policy will be unveiled tomorrow.

Ministers will outline plans to introduce a single payment of around £144 to everyone who has worked at least ten years, in the biggest pension shake-up for decades.

Speaking to Sky News, the Chief Secretary to the Treasury said the changes would fix “some of the big problems” in the current system.

* Mark Pack has written 101 Ways To Win An Election and produces a monthly newsletter about the Liberal Democrats.

* Mark Valladares subscribes to the Letter of the Lords, and thinks that you should too…

The current scheme, the product presumably of the Liberal Democrats’ desire to create popular policies which differentiate us from the Tories among the voters of middle England, is closer to the more base Tory instinct for short-term economic populism than the liberal tradition.

The policy is wrong-headed because it acts contrary to everything else this government has attempted to do economically. It’s a policy which chases short-term growth at the expense of long-term stability. It was as a critic of such policies in the Labour years that Vince Cable made his name. This government has steadfastly resisted such policies, choosing instead the far less popular route of longer term stability and lower growth in the short term.

The pension for property scheme may have a positive impact on growth, but it risks returning the UK to a situation where growth is secured against the vagaries of the housing market, the collapse of which has caused a number of UK recessions and was a key component in turning the ‘credit crunch’ in to a recession.

The other long-term concern regarding this policy is that many UK pension funds are in deficit. Indeed it is a reasonable argument that if the financial crisis had not occurred when it did, current political discourse would concern the need to address the looming pensions crisis.

Tagging people’s potential future pension income to a volatile housing market threatens to exacerbate the future pension deficit issue. And all for the short-term gain of ephemeral economic growth this side of an election.

Apart from the practicalities the policy is profoundly illiberal, as it encourages the transfer of wealth from one generation to the next within the same family, perpetuating and disadvantaging those from a less well-off background. Meritocracy, rather than class envy, is at the heart of liberalism. The pension for property policy moves the party a step further away from its meritocratic origins.

For the British economy to achieve anything like its full potential, this government, and subsequent ones, must pursue a policy almost the polar opposite of ‘pension for property’: reducing the incentives for people to invest in residential property that is not their own home, and encouraging investment in other sectors of the economy, by taxing investment in residential property other than one’s own home, and giving greater tax reliefs for investment in other sectors, such as green industries.

The ‘pension for property’ plan is a terribly unsubtle attempt to chase voters of the mid-,market tabloids who are apparently obsessed by house prices regardless of the consequences for the wider macro-economy.
The Liberal Democrats have traditionally been far more rounded in their economic analysis than that, and while ’differentiation’ and strategies to achieve growth are welcome, they must not come at the expense of the bigger picture.

* David Thorpe is a member of the Liberal Democrats in Newham, and works for an economics publication.

There are many lonely, vulnerable and poor pensioners who need support. But it’s insulting to suggest that everyone over 60 or 65 can be lumped into the category of frail granny (to say nothing of grandpas!). There is a huge range of incomes amongst pensioners. At the very top, the average annual pension of a FTSE100 director is £240,191 and will benefit from regressive tax breaks at every stage.

Note also that pensioners and non-pensioners are ultimately the same people: the question is when is the best time of life to receive tax breaks. It is surely less useful in later life when people are far less likely to have mortgages to pay, child care costs or student debt. We all know how economically and socially important it is to invest in children’s education and living standards, and it is difficult to see how tilting the balance in favour of pensioners achieves this same long-term social value.

Even if you think a tax break is most useful later in life, it’s currently the richest pensioners who benefit most, as the graph below shows.

Encouraging pension saving is important but taking a tax-free lump sum means a lower annual pension, contrary to this idea. We propose phasing out the tax-free lump sum (not affecting current pensioners) and applying National Insurance to the incomes of affluent pensioners. Together these would raise a whopping £9.2bn per year.

With all parties committed to closing the deficit, we must ask whether these tax breaks are a good ‘use’ of money. Are they better than investment in infrastructure, child care, or averting the £10bn of extra welfare cuts that could be made? Are they the best way to target spending or tax breaks at the lowest paid, including poor pensioners? We show, for example, that using the money to increase the personal allowance by another £1,700 would be much more progressive – both for all households and for pensioners. Only a third of future pensioner households – the richest third – would be worse off.

We must also consider the Dilnot cap on social care costs, a welcome move but one that benefits rich pensioners most. This same group should fund it through measures like these. Other options include ending higher rate tax relief and means-testing age-related benefits, but right now it seems more likely that the money will – for political ease – instead come from young people and general welfare cuts.

Inevitably, if the Coalition proposed ending these tax breaks it would be denounced by some as ‘an attack on the poorest and most vulnerable in society’ but this graph and report should make clear how untrue that is. Click here to read the full report.

* Adam Corlett is a researcher at CentreForum.

Almost 11 million of the adult population are not saving enough for retirement. So if millions of people are not going to get a nasty shock when they retire we need some big changes in the world of pensions. …So what is the truth about pension scheme charges, and what is the Government doing to make sure that people get maximum value from their hard-earned pensions savings?

He goes on to say that the Government has the power to cap charges, and undertakes to use them if consumers need that protection.

For most people, joining a workplace pension, with an employer contribution and tax relief on top remains one of the best things they can do with their money.

But I remain determined to make sure that every pound that they put aside is turned into the maximum possible amount of pension.

And if further measures are needed to clamp down on charges, then we will not hesitate to take them.

You can read the full article here.

* Mary Reid is the Tuesday Editor on Lib Dem Voice.

This is an example of the Coalition delivering a major benefit to mainly women.  And although it’s Iain Duncan Smith who’s quoted in the article, make no mistake, it’s Liberal Democrat Pensions expert Steve Webb who’s put this together.This is the man who found a fault with the way some women’s pensions had been calculated in opposition and got the DWP to sort it, giving many women a pension boost of more than £1000 so he has a lot of previous form in getting justice for women pensioners.

The fact that women are penalised in old age for taking on caring roles that would cost the State a fortune if they didn’t has always been a horrendous injustice. Liberal Democrats have been banging on about changing it for decades. And do you know what? First chance of power we get, we sort it. How good is that?

We need to get out on people’s doorsteps and make sure people know that it’s the Liberal Democrats who are responsible for them paying less tax, for increasing their State Pension by £5.30 a week, for changing a fundamentally unfair Pensions system.

The reason we’re willing to take the pain that this Coalition brings us is so that we can deliver things like this. It’s two years today since we watched Nick Clegg enter Downing Street for the first time as Deputy Prime Minister. I wrote at the time that my emotions were lurching between horror, pride, fear and hope. They still are. This is a good day, though.

* Caron Lindsay is Co-Editor of Liberal Democrat Voice and blogs at Caron's Musings

The average defined contribution pot – the pension now replacing the more generous final salary scheme – is £26,000. At current rates, this fund would buy a Joint life 50%, 3% escalation annuity of less than £1000 per year.

One in six people retiring this year have not saved into a private pension or accumulated other assets, so will see their salaries replaced with the state pension only.

To provide for a pension in retirement, reasonably proportionate with prior earnings, it is recommended that somewhere in the region of 16% of lifetime earnings should be invested over the course of a working life. Supermarket chain Morrisons, is introducing what is called a cash balance scheme into which employees and the employer contribute 16% of pay.

A cash balance scheme shares risk between the company and its employees. The company will guarantee the pension pot payable at retirement when members typically purchase an annuity.

The company will manage and underwrite the investment to produce a guaranteed fund upon retirement, delivering a predictable pension pot for its employees irrespective of fund performance. This is a significant improvement on the existing defined contribution plan that requires members to actively manage their investment funds.

Such a risk-sharing scheme could be mirrored across the board (in the public and private sector) and adopted as auto-enrolment is introduced. For SME’s and the public sector, the government is best placed to underwrite the investment fund through the National Employment Savings Trust (NEST) and to direct the investment of the pension fund assets.

There is no shortage of cash generating and socially beneficial investments to which NEST could apply its fund. The pension fund could source investments on a commercial basis in areas that are of strategic long-term significance to the British economy – whether that be long-term fixed rate mortgages; economic infrastructure development; nuclear power; green energy development or a National industrial investment bank.

Current institutional arrangements for the pension fund industry are not delivering for the great majority of retirees. Pension funds have seen precipitous declines in value, low or negative returns on investment, relatively high charges and derisory annuities.

A national cash balance pension scheme (with employee contributions supplemented by a combined tax and NI rate of 32%), generating guaranteed returns equivalent to a benchmark ten year gilt yield, would allow for a greater level of certainty in pension planning with the corollary of socially useful investments. Providing for a decent retirement income requires a reasonable basic state pension combined with private savings and longer working lives.

To engender the public trust needed to encourage pension savings, our institutional arrangements for pension provision in retirement need to be improved. Providing individuals a simple and safe option of a guaranteed pension pot at retirement, without the need to actively manage portfolio investments, could be a major step in the right direction.

* Joe Bourke is an accountant, former parliamentary candidate and Treasurer of Hounslow Liberal Democrats

The 2010 manifesto also proposed giving tax relief on pensions only at the basic rate, so that everyone gets the same tax relief on their pension contributions. Higher earners typically benefit from relief at 40% or 45% on pension contributions. The majority benefit from a tax-free lump sum withdrawal from their pension fund and pay only basic rate tax of 20% on their pension annuity income.

Gift aid works by grossing up the amount of your charitable contribution by the basic rate of tax. If you make a charitable donation of £100, then the charity can claim an additional £25 back from HMRC, making your total contribution £125. The effect is the same as if you had made a gross donation of £125 and claimed tax relief yourself at the basic rate of tax of 20%. The charity would have received £125 and your net contribution would still be £100.

If you are a higher rate tax payer making the same donation, the charity receives the same amount, but you are able to claim back a tax refund equivalent to the higher rate you pay – less the amount of basic rate tax HMRC pays to the charity. In the above example a higher rate taxpayer could directly reduce his tax bill by £25 to £31.25.

Tax relief on personal pension contributions operate in a similar manner. Your contributions to a personal pension fund are supplemented by an amount equivalent to basic tax relief. Higher rate taxpayers can claim additional relief as a reduction against their tax bill.

The tax relief is the reason why personal pension fund contributions and charitable donations are favoured by higher rate taxpayers.

What if everyone got the same relief for charitable or pension contributions at 32% i.e. the rate that would apply, if basic rate income tax and national insurance were combined?

Firstly, the income of charities is less likely to decline and may increase, as all of the tax relief for both basic rate and higher rate taxpayers goes directly to the charity. The exchequer would be paying more to charities for donations from basic rate taxpayers, while paying out less for donations from higher rate taxpayers – a broadly neutral position.

Similarly, the level of savings in pension funds is unlikely to decline for the same reason. As a consequence, all taxpayers would get the same level of relief that they ultimately pay on their pension income.

* Joe Bourke is an accountant, former parliamentary candidate and Treasurer of Hounslow Liberal Democrats

I’ve no doubt that many of you have been out on the doorstep over the last few months, talking to people and showing them what we are achieving both nationally and locally.

You will already have your big messages in place. Number one has got to be your local record of service – all year round, not just at election time. Lib Dem councillors across the country work hard for local people. We listen to our communities and try to give them a voice in decisions made that affect them. In power we work to protect the services people most value, and to protect the most vulnerable in society.

The second message is that we are putting more money back in the pockets of hardworking people – something we can trumpet because of action we’ve taken both locally and nationally. On the local front, this year every single Lib Dem-run council has frozen their council tax bills – for the second year running. Neither Labour nor the Conservatives can say the same, with Labour-run Redcar, Leicester and Nottingham, and Tory-run Peterborough, Chelmsford and Surrey among the culprits who are driving up their bills this year. Four Lib Dem Councils – Eastleigh, Hinckley & Bosworth, Three Rivers, and South Lakeland – are even cutting their portion of the council tax bill this year!

Nationally, from this Friday, Liberal Democrats will deliver another £130 income tax cut to every basic rate taxpayer. That’s 25 million people getting a tax cut and 1 million people lifted out of paying Income Tax altogether thanks to us. And we’re making the rich pay. They face increased capital gains tax, an annual banker’s levy (worth £2.5bn each year) and even having to pay VAT on their private jets – something that despite all their posturing, Labour never got around to doing when they were in power. Combined with £900m invested in the battle against tax evasion, and the caps on tax reliefs introduced in the budget, we’re also doing more to make sure the rich actually do pay their fair share, and can’t dodge it.

There’s plenty else. The second year of record rises to Pensions, with pensioners set to benefit from a rise of £5.30 a week this year, on top of the £4.50 rise last year. There’s an extra £1.25bn for the Pupil Premium, targeted at our most disadvantaged pupils ensuring that they can have a fair start in life as well. We’re creating jobs, and supporting young people in the difficult path back into work by driving a record expansion of apprenticeships to over half a million, and the Youth Contract, announced yesterday, designed to get over 400,000 young people earning or learning.

And we’re giving real power and control back to local areas, particularly over planning. We’re protecting the Greenbelt and Areas of Outstanding Natural Beauty, ensuring that Brownfield land is used first for development, whilst also striking a sensible balance between protecting the environment and building the homes we so desperately need. And we’re giving councils and communities real say over what is developed in their areas through neighbourhood planning. Planning is set to become a bottom-up community-driven process, not the top-down imposition it’s been for far too long. Lib Dems across the country should be getting out on the doorstep and canvassing their communities to see what they want in their local plan. What kind of development do they want to see and where? It’s a huge campaigning opportunity for the party, and is just the kind of “community politics” we’ve championed for decades. Richard Kemp has already told LDV readers that he’s all set to start the process in his ward in Liverpool from day one, so there’s no reason why every Lib Dem councillor and candidate shouldn’t be using this opportunity as well.

This is a challenging round of local elections – it’s only the second we’ve ever fought as a party of government. We’ve had some tough choices to make, and at time some difficult compromises too, a necessity of coalition. But we’ve also achieved a lot of what we have campaigned for, and there is more to come. We need to get out on the doorsteps and remind people why they vote for our hardworking candidates locally, and what benefits we’ve been able to deliver as part of the Coalition nationally.

* Andrew Stunell MP is the Lib Dem Communities Minister with responsibility for community cohesion and race equality. He is also Chair of the Liberal Democrats Local Election Campaign Team.

We are on the verge of delivering on another key manifesto promise after the Chancellor announced in yesterday’s budget the coalition’s intention to give pensioners £140 a week. While this morning’s headlines are heavily slanted to the reduction of the 50% tax rate, and the ‘granny tax’, nestled away inside yesterday’s budget was a pledge to deliver a flat rate pension system.

When announcing the introduction of a new single-tier pension for future pensioners, the Chancellor paid tribute to our man in the DWP, the Liberal Democrat Pensions Minister, Steve Webb MP. In fact to quote the Chancellor,

Such is the complexity of this means-tested system that only someone like our Pensions Minister can work out exactly what someone is entitled to and what they need to save.

These words were not lost on me. The coalition is trying to simplify the tax and pension system. Having different thresholds at when you begin to pay income tax complicates things. We want to have one rate at which people start to pay tax. We are rapidly raising the rate at which those under 65 pay income tax, and soon this will be equal to what pensioners who pay income tax are already entitled to. And from then on there will be one flat, generous rate for all.

I realise many pensioners may feel aggrieved at this, thanks in no small part to the media’s inclination to whip up an issue, but firstly I would like to state no pensioners will be worse off in cash terms. Secondly this will not affect half of all pensioners as only 50% of pensioners currently pay income tax. Thirdly the introduction of the ‘triple lock guarantee’ which will see pensions rise from now on by whichever is greater; inflation, average earnings, or £2.50, led to a £4.50 increase in the State Pension last year and the highest ever cash increase of £5.31 this year. And finally yesterday’s news that we are going to introduce a £140 flat rate pension.

Further details will follow later this year, but it will be a single, generous, basic state pension for those who have worked hard and saved all their lives. It will also mean an end to the complex and unfair means testing that has for too long overshadowed the state pension system. People who can only save a little bit for their retirement will no longer see it means tested away by pension credit, and every penny you put away will go towards your retirement, which will be a particularly big boost to women and self employed workers who are the biggest losers under the current system.

This is all down to the hard work of our Lib Dem Pensions Minister, Steve Webb. However there is still a long way to go before it becomes a reality, and therefore it is vital we all get behind Steve as he seeks to make yet another long cherished Lib Dem policy delivered in government.

However Ed Balls and colleagues must be delighted that so far everyone seems to have missed that the last Government froze the Age Allowance between 2009-11 – or as Shadow Chief Secretary to the Treasury Rachel Reeves would term it Labour imposed ‘an enormous stealth tax for older people’.

* Sara Bedford is a local councillor on Three Rivers District Council and a member of the Lib Dem Voice editorial team.

The increase of £1,100 is worth £220 to 21 million working people – taking the total income tax cut for working people delivered over 3 years by the coalition to nearly £550 a year. Two million people will pay no income tax at all. By going ‘further and faster’ as Nick Clegg promised, we’re getting real help to millions of hard-pressed people at a time when they need it most.

The £14billion tax cut means that the government is within ‘touching distance’ of delivering the most important promise we Liberal Democrats made in the 2010 General Election manifesto – that no one should have to pay any income tax until they earn more than £10,000.

With the allowance rising to an historic high of £9,205 next April, our aim will be to deliver the final step at the next budget – so that people get the full benefit over a year before the 2015 general election.

This big tax cut for working people is paid for in part by a significant increase in the tax paid by the wealthiest. As part of the Coalition budget deal, we agreed to reduce the top rate of tax to 45p – but only after securing a series of new taxes on the wealthy that pay for it five times over.

Labour’s 50p rate turned out not to work effectively. By introducing taxes that do work, like a tycoon tax, raising stamp duty, blocking stamp duty avoidance, and getting non-resident companies to pay capital gains tax on their residential property, we have secured real progress on the taxation of wealth. This is a budget for the many, not the few.

All of this has been done while sticking to our tough but necessary plan to deal with this country’s financial problems. Britain can’t afford unfunded giveaways – unlike the last Labour government, we have made sure everything is paid for.

The Budget shows real progress on our commitments to infrastructure – on roads, railways, and renewable energy. Tougher green taxes on company cars will help cut emissions as well as raising money.

The Budget delivers other long fought-for Liberal Democrat ideas. The Government is now committed to delivering the ‘single tier pension’ – Steve Webb’s plan for a citizen’s pension that will mean a basic pension above the means test of around £140 per week.

Specific measures to support key industrial sectors like creative industries, technology investment, aerospace and university spin out, as well as further business tax simplification means that we have delivered a budget for growth as well as fairness.

The negotiations on this budget were friendly but hard fought. Liberal Democrats should be proud of what we have achieved – not for ourselves, but for the millions of people who voted for us because they saw a party willing to stand up for the squeezed middle. Those people can see the difference we are making in Government for them – and that gives us a very strong message for the elections in May and beyond.

Talking about how much pension someone gets without talking about how many years they work is odd, to put it mildly. For example, I built up a fairly small public sector pension entitlement, but then I spent several years rather than several decades working in the public sector. Factor in the number of years and rather than having got a dreadfully tiny pension, I got a decent pension.

Here then are the answers to the obvious question, showing the average (mean) pension in 2009-10 along with the average number of years people work to get that average pension:

Local government (England) – £4,052 / 7-8 years
Civil Service (UK) – £6,199 / 13 years
NHS (England & Wales) – £7,234 / 11 years
Armed forces – £7,722 / 10 years
Teachers (England & Wales) – £9,806 / 23 years

That context makes the figures look rather different. The local government pension figure is indeed small, but it also reflects people spending a small proportion of their working life in local government on average. At the other end, it makes the teacher figures look somewhat less generous, especially when you consider the amount of time it takes to get the necessary qualifications and when you compare teachers with the armed forces or NHS – a decade more adds only a couple of thousand in round terms.

Source: Hutton interim report Table 1.B and final report paragraph 5.11. Thank you to Thomas Gault for helping me locate these figures.

UPDATE: As has been pointed out in the comments thread, there are some problems with these figures. I took them from information provided by the House of Commons Library but on querying them based on the comments made, they now say that the years of service figures quoted above include people currently in work and are not just for those currently in receipt of a pension. Apologies for that.

The ‘correct’ figures look to be available for only one of the areas of public service quoted above, namely local government where the average number of years of service that goes with the £4,052 figure is 16 years.

* Mark Pack has written 101 Ways To Win An Election and produces a monthly newsletter about the Liberal Democrats.

No, I’m afraid we’re not doing any of those things..

This motion is not about tax fairness – it’s about raising more tax. And in particular, hitting people’s pensions to do it. A financial transactions tax – a so-called “Robin Hood Tax” – sounds like such a good way to raise money, doesn’t it? Let’s tax all those nasty bankers’ actions in the city. And it’s only a tiny little amount of each transaction but it raises so much money… Right?

Wrong!

Firstly, it’s not taxing “the bankers” – it’s taxing the money that they are investing, and mostly that means the funds of pension plans, insurance companies, savings schemes. It means millions of ordinary people’s money. That’s why there’s so much of it.

Secondly, if it raises a lot of money then it’s not a “tiny little amount”. Look at the total you plan to take out of the City – that’s got to come from somewhere and where it’s going to come from is the growth of pension and insurance funds. That means worse pensions and higher insurance premiums, not just for “the bankers” but for everyone.

We’ve seen this happen before.

In 1999, Labour Chancellor Gordon Brown abolished a thing called Advance Corporation Tax. This was a deal where companies would pay an amount of tax on account whenever they paid dividends. The logic being if they could afford to pay their shareholders, they could afford to pay HM Treasury a bit too. People receiving the dividends could then treat them as “tax paid”. The wheeze was that pension funds, which didn’t have to pay tax, could then claim back an extra 25% on all dividends.

That meant that a chunk of corporation tax was going straight into the pension funds and it made pensions a really good investment that grew ahead of the market. It made sure that the pension funds would be big enough, when the time came, to pay for people to get a good pension. From Gordon’s point of view, though, that money belonged to the Treasury, so he put a stop to it.

That took a huge bite out of the pension funds’ incomes, and Gordon Brown’s raid on A.C.T. is one of the main reasons that almost all private final salary schemes have been ended, and why Danny Alexander is having such a tough time with the unions over public sector pensions. So rule one: before you decide to take a huge bite out of pension funds, remember what the consequences will be.

Well, what about the other tax-raising method: “limiting the relief for payments into pension funds, which” – allegedly – “currently offers the greatest benefit to higher rate tax payers”. I can see how this looks like easy money, the same as the Robin Hood tax.

At the moment, if Ms Basic, a 20% taxpayer, pays £80 into her pension the government matches that with £20, so she gets £100 in the pot, as it were. But if Dr Higher, a 40% taxpayer, pays £80 into her pension the government not only makes that up to £100, but also gives Dr Higher £20 back. That does look like free cash for the 40% taxpayer, doesn’t it.

But you’re not seeing the whole picture. That £20 is not a gift from a generous government. It’s your own money being given back to you. As in “we believe people know how to spend their own money better than governments do”. The simple principle is: you don’t pay tax on the money you put into your pension.

Ms Basic earns £100 and gets £20 taken away in tax. Her pension contributions cost £80 and the government gives her her £20 tax back. Dr Higher earns £100 and gets £40 taken away in tax. Her pension contributions also cost £80 and the government gives her £20 tax back into her pension, leaving her £20 worse off. Which is why she gets the £20 pension credit.

Pensions are not like putting money into a savings account. For starters you can’t get it back until you retire and even then there are strict conditions about what you have to do with the money. But if you put £100 into a savings account you would not expect the government to tax you on taking it out again. Well, you do get taxed on your pension income – and that’s because you didn’t get taxed when you put it in. We used to have a principle of not taxing people twice on the same income. “Limiting” the higher rate pension credit would break this principle.

Suppose you did a deal with your employer that you would get £100 less each month, but get £1200 at Christmas. You wouldn’t expect to pay tax on the £100 that you’re not getting, would you? Well, that’s how pensions are supposed to work – you agree not to take a chunk of your income now in return for getting it “at Christmas” or rather after you retire.

Let’s say Mr Company, another 40% taxpayer, agrees with his employer that he will surrender £100 of salary a month which they will pay into the company pension scheme. Because he’d have paid 40% tax on that, this only reduces Mr Company’s take home pay by £60.

So if you abolish the pension credit, you end up with a situation where there are two people getting the same income and pension but one of them, Dr Higher, pays £80 for her pension and the other, Mr Company, only pays £60. You’ve taken away her tax refund, but he doesn’t need a pension credit to refund his tax because he never paid the tax in the first place.

How is this making tax fairer? Do we want people to make provision for their retirement? Should we encourage people who pay into pension plans or penalise them? Do we want pensioners to be independent or forced to rely on the generosity of future governments?

The ideas behind this motion are very well-intentioned: the desire to redistribute income to the lower-paid by raising the taxes paid by the better-off. And I fully support the other ideas in the motion – the mansion tax and the general ant-avoidance rule. But if we want tax to be simpler and more transparent we need to be honest about redistribution and put the 40% rate up to 41%. (Or if we’re being really honest and including National Insurance, the 42% rate up to 43%.)

Don’t do it by making pensions so poor an investment that people just don’t bother with provision for their old age at all.

* Richard Flowers was the winner of the Liberal Democrat Voice Blog of the Year asward 2010 and blogs at The Very Fluffy Diary of Millennium Dome, Elephant

If there’s one thing Alexander’s intervention confirms it’s this: the key question for the 2012 Budget is no longer whether the Lib Dems will get anything on personal allowances but how the next increase will be paid for. This marks a big change of tactics for Clegg’s team from previous budgets. They’ve come hard out of the blocks in a very public way and not just to argue for the allowance move itself — easy words, after all — but putting a big money, progressive, revenue-raising measure front and centre. … And, make no mistake, for those on low or modest pay, it’s a change in emphasis — if it pays off — that could be hugely important. …

So all in all, 20 minutes in to Budget 2012, it’s probably fair to scratch up 1-0 to Team Clegg. They’ve come out early and marked their territory well. And in higher rate pension tax relief they’ve identified an area of public spend that there’s long been a good case for reviewing. Ultimately, of course, if a week’s a long time in politics, six weeks is an aeon in budget negotiations. Staking your claim early is bold but it’s also risky. The key question now is whether the Lib Dems can hold on for the win. One thing’s for sure: with their funding ambitions now out in the open for all to see, any further cuts to tax credits in March would be a stinging humiliation.

You can read James’s post in full here.

* Newshound: bringing you the best Lib Dem commentary published in print or online.

Here’s how the Telegraph reports it:

Danny Alexander, a Liberal Democrat Cabinet minister, says the better-off are receiving overly-generous tax relief when they invest money for their retirement. Mr Alexander’s proposals would see tax relief halve from 40 per cent to 20 per cent. He also wants workers on the minimum wage, who earn up to £12,500 a year, to pay no income tax at all. Mr Alexander claims that removing the higher-rate tax relief would save the Exchequer more than £7 billion and make the system fairer. Even restricted to those earning more than £100,000 the Treasury could save £3.6 billion.

“If you look at the amount of money that we spend on pensions tax relief, which is very significant, the majority of that money goes to paying tax relief at the higher rate,” Mr Alexander told The Daily Telegraph. His remarks may open up a new dispute between the Tories and Lib Dems over tax. They are already at odds over Lib Dem calls to keep the 50p top rate of tax and introduce a “mansion tax” on high-value homes. George Osborne, the Chancellor, is expected to strongly resist any calls to scrap higher-rate tax relief. …

Nick Clegg, the Deputy Prime Minister, wants to move “further and faster” with tax cuts for lower-paid workers — a move that would be funded by higher taxes on the better-off, but which had not been accepted by Conservatives.

At the Liberal Democrat spring conference next month, the party’s members are expected to pass a motion calling for cuts in tax relief for higher-rate savers, with the Chief Secretary likely to back it. “I’m willing to study that motion but I dare say I will [support it],” he says. “I wrote an election manifesto at the last election which proposed going considerably further for precisely the reasons of fairness that I’ve set out. As a Coalition government, we’ve made some decisions in this area already, which go in the right direction. When it comes to people on low and middle income, I am a tax-cutter by instinct.”

Firstly, the IFS compares public sector pension provision with that of the private sector and implies that the inevitable disparity has to be rebalanced by cutting the public sector rather than improving private sector provision.

Secondly, they choose to ignore the approximately £100 billion saved by moving from RPI to CPI and then says that if you exclude £100 billion and the fact that retired public sector workers’ pensions are going to have lower increases than before, they are better off.

But this is only true if one discounts the effects of the CPI switch and then assumes that their pay won’t keep pace with the annual indexation of each year’s contribution to their pension. But even so, the difference between the two is insignificant because the lowest paid workers’ pensions are going to be tiny on any analysis.

A straight comparison between public and private sector pension provision is always going to make public sector workers look better provided for. That is because regulatory changes to defined benefit pension schemes and tax grabs of pension assets by the Labour government coupled with over-enthusiastic intervention by The Pensions Regulator caused a run for the door by private sector employers, particularly when the recession hit.

Those closing their schemes have tended to replace them with cheaper, defined contribution schemes which dump all the risk onto the individual worker, and to which employers have contributed about half the amount they put in to the DB schemes.

And about 9-million private sector workers have no pension other than that provided by the state. Auto-enrolment is supposed to deal with this, but does not get round the fact that a growing number of private sector workers have so lost confidence in defined contribution pensions that they are making the decision not to save for a pension at all.

None of this justifies an attack on public sector pension provision. A decent pension is one of the foundation stones of a civilised society and the answer to the differential between public and private sector pensions is to improve the lot of the private sector.

As a taxpayer I am very happy that some of my taxes go towards paying for the pension provision of the people who have spent their working lives teaching our children, catching criminals, keeping us safe and treating us when we’re ill. The government should be setting an example to the private sector in its treatment of those it employs instead of chipping away at their pay and pensions – the average public sector pension, let’s not forget, is just £7,800 a year with women on half that.

The most urgent action this government should undertake is to defend private sector DB schemes and radically redesign and simplify DC schemes to give private sector workers confidence that their pension schemes can be relied on. There are several models being developed, some along the lines of the Dutch collective DC system which to my mind would be particularly attractive to those not in a DB scheme.

There should also be a serious investigation into the structure and levels of fees and charges levied by the pensions industry, in particular the investment banks: there is a case to answer that these charges are excessive. Action should be taken to rein this in.

It is because the private sector pension situation is in such crisis that I will be proposing a motion at the Liberal Democrat Spring conference in March, calling for all these actions and more.

It is worth recalling that 100 years ago, when the giants of Liberal history, Asquith and Lloyd George, proposed introducing the state Old Age Pension that the Tories howled that we couldn’t afford it. The Liberals introduced it anyway, and no-one would question its crucial role in helping to keep old people from dying in poverty. And how did the Liberals manage to pay for this vast new line of state expenditure? They taxed the rich.
The argument is not that we cannot afford to allow our working people decent pensions. We’ve got to afford it.

* Janice Turner was chair of the Young Liberals from 1983-85 and is now a member of SLF Council