Steve Webb on taking a chance to set pensioners free

Steve Webb, pensions minister, is interviewed in the Observer in the run-up to the big pensions change:

Plans to give millions of people powers to get access to their pensions savings from 6 April are a calculated risk, the minister in charge of the biggest pensions shakeup in decades has admitted.

On what is being called “pension freedom day”, millions of people will be able to do whatever they want with their pension pot, instead of having to buy an annuity. This liberalisation is being widely hailed as the biggest shakeup of the UK pensions system since the old-age pension was introduced in 1908.

However, amid warnings that people may leave themselves short of money in their old age, the pensions minister, Steve Webb, concedes in an interview with the Observer on Sunday that the plans come with some risk. “We wouldn’t be doing it if we thought it was a disaster, but you do take a risk when you trust people with their own money,” he says. “Paternalism feels safer, but look where paternalism got us. It got us mandatory annuities and a lot of dissatisfied people. Of course you take a chance when you set people free but, as a liberal, that’s why I’m in politics.”

You can read the full article here.

* Paul Walter is a Liberal Democrat activist. He is one of the Liberal Democrat Voice team. He blogs at Liberal Burblings.

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  • Will this be treated as notional income by the DWP? Under their rules if you CAN claim other money then this is taken from your benefits. Anyone know?

  • Philip Thomas 1st Mar '15 - 12:14pm

    The plan comes with virtually zero risk for pensioners, who have a state-subsidised safety support net (increasing above the rate of inflation, thanks to another of Steve Webb’s brilliant ideas) if they spend all their money. Logic therefore indicates that a large number of pensioners will do precisely that.

  • David Allen 1st Mar '15 - 12:32pm

    This will end in tears. Many pensioners will spend early and leave themselves short of money in their old age. They will then line up behind whichever politicians (Farage comes to mind) are prepared to take up their case, bleat about second world war heroism, demand that the State should provide them decent nursing care in their last days, and thus rescue them from the consequences of their own irresponsibility.

    The irresponsible pensioners will have one excuse for their irresponsibility. They will protest that they were entitled to reply on Government advice. This Government advised them that it was OK to blow their pension pots on luxuries. So hey, that’s what they did, right?

    Steve Webb will be remembered for “Buy a Lamborghini”. His infamy will match Clegg’s on tuition fees.

  • stuart moran 1st Mar '15 - 12:57pm

    David Allen draws out an interesting point about pensioners

    I have always been tolerant of the benefits given to pensioners due to their having gone through the terror of war and the horrible austerity in the immediate post-war years

    That generation is very much gone now though and, in fact, the pensioners now and in the next decade will be predominantly the baby boomers who lived through the period of 50s expansion, 60s liberation, free education, free healthcare, final salary pensions etc and voted for Thatcherism in their droves

    I have far less tolerance for this generation and, apart from the respect we should have for our elders, am far less convinced of the need to stuff their mouths with gold

    My patience is wearing thing with Governments who pander to this one demography and one whom to which I know longer feel the deference that I did to their parent’s generation!

  • @David Allen – your post is a spoof, right?

  • Simon McGrath 1st Mar '15 - 1:53pm

    @SimonShaw – has he actually been pretending to be a liberal? I always assumed he was a socialist – the total lack of interest in how anything is paid for, the assumption that there is a magic money tree, the total self righteousness ….

  • stuart moran 1st Mar '15 - 2:25pm

    Simon McGrath

    I assume your post is a spoof?

  • Chris Manners 1st Mar '15 - 3:23pm

    It’s of course a happy coincidence that this “freedom” and “liberalism” brings in extra money in the short term for the Treasury, per the OBR.

    And interesting to note that there’s far less freedom and liberalism at the other end of pensions, via compulsory enrollment.

  • Paul In Wokingham 1st Mar '15 - 3:50pm

    “Of course you take a chance when you set people free but, as a liberal, that’s why I’m in politics.”


    Many years ago while living in the USA I would often see a popular bumper sticker that showed an elderly couple dancing and throwing wads of cash into the air with the words “We’re spending our kids inheritance!” underneath. But of course the wry subtext is that they are doing no such thing. People who have saved prudently all their lives will seldom then blow it all on a spree – such as buying a Lamborghini – but will continue to look for the best return on that carefully accumulated capital.

    Of course there will be a few stories in the Daily Mail about people blowing it all at once, but increased freedom of choice for pension investments is a good – and, yes, a slightly risky but undeniably Liberal – principle.

  • David Allen 1st Mar '15 - 4:51pm

    “a slightly risky but undeniably Liberal – principle.”

    The risk is that when Tom spends his pension pot on luxuries, and then leaves himself destitute in old age, it is not only Tom who will suffer the consequences of his actions. Tom (and the millions who do likewise) will demand free nursing care, to be paid out of increased taxation. Sam (and millions of others), who has saved his pension pot, will find himself compelled to pay more tax in order to look after Tom.

    Is that Liberal? Is it Liberal to inflict avoidable risks on others?

  • David Allen 1st Mar '15 - 4:56pm

    “People who have saved prudently all their lives will seldom then blow it all on a spree – such as buying a Lamborghini – but will continue to look for the best return on that carefully accumulated capital.”

    The Australian experience of pension freedom, soon likely to be reversed, indicates that this is damgerous complacency.

  • A risk, but for who? I don’t mind if the pensioners want to risk their own financial security. I do mind if the risk is really going to lie with the taxpayer, as David Allen describes. These people were given generous tax relief on their pension contributions on the understanding that they were using it to buy security in old age.

  • Well nobody seems to know the answer to my question. I know that now if you are claiming JSA, ESA or any income related benefit and delay taking your occupational pension that income is taken into account as notional income and the amount you would have got is deducted from the benefit because under the rules you could have taken it. Therefore I am presuming that the same will happen here and people will be treated as being able to draw that money whether they want to or not and will have any benefit reduced. This of course will hit the most vulnerable as any pension they hoped for in the future will have to be spent now. Wily way to reduce the Welfare bill?

  • Jane Ann Liston 2nd Mar '15 - 10:23am

    A less punitive way to reduce the welfare bill would be to get those of us who are just short of the 35 qualifying years and only taking up time and resources to get the NI credits off the list. I have nearly completed 34, but have 4 other years with insufficient NI to qualify. If these were counted as equivalent to a complete year, I’d be out of the DWP’s hair, and I’d be able to look for work more efficiently, rather than making lots of applications for the sake of it to keep the buroo happy! Mr Webb, if you are reading this, how about it?

  • Why exactly should people get tax breaks to buy a second house when they retire? The case for pension tax relief is based on the assumption that people are using the money to provide themselves with an income in retirement; now that it is to be used simple to acquire assets, potentially in competition with others, why should it continue to attract tax breaks?

    And what about the longer term? It used to be that pension savings provided for old age, now they can buy lasting assets that can be passed on to the next generation making our society less meritocratic and more driven by inheritance.

    I can see why the Tories love this policy; I fail to see how it meets a liberal agenda.

  • Looks like Anne is the only one paying attention.
    The policy has been deceptively sold as giving the pensioner the opportunity to take out their money, when in fact its real purpose is for the Government who will now dip their sticky fingers into your ‘unlocked’ pension pot for your care costs in old age.?

  • @Jack – “Why exactly should people get tax breaks to buy a second house when they retire?”

    I suggest you talk to a financial/pension’s advisor about taking any cash out of your pension pot, my advisor is very very wary about it as the tax implications are looking scary.

  • I don’t know about second homes but vast numbers of ex council houses are now in the hands of ‘buy to letters’…The financial advice channels are full of invitations such as “Right to buy turns ex-council homes into buy-to-let ‘goldmine” for those with cash to spare to invest….

    I know it’s history but it still rankles and it may well be that the only way to an affordable house is for the young to wait until their grandparents ‘shuffle off’ and retake the ‘buy to let’…

  • @ Jane Ann Liston
    I have 43 qualifying years so 8 are ignored. Now there is a money spinner, a pity I am unable to sell although I would give them if I could. While many will have to buy their extra years I do not get a refund!

  • paul barker 2nd Mar '15 - 1:30pm

    @Expat. The flat next to me was one of those & its just been re-possesed by the Bank. Once Interest Rates start to rise I expect we will see that happening a lot.

  • Brenda Lana Smith 2nd Mar '15 - 3:16pm

    As “Liberal” and “Democratic” in Liberal Democratic Party signifies roots in both the Liberal Party and the Social Democratic Party… shame on you who are decrying David Evans for being a socialist… since the formation of our party some members honourably and rightfully have more socialist that liberal political leanings… ergo… get used to it…

  • Brenda Lana Smith 2nd Mar '15 - 3:26pm

    As “Liberal” and “Democratic” in Liberal Democratic Party signifies roots in both the Liberal Party and the Social Democratic Party… shame on you who are decrying David Evans for being a socialist… since the formation of our party some members honourably and rightfully have more socialist than liberal political leanings… ergo… get use to it…

  • Brenda Lana Smith 2nd Mar '15 - 7:28pm

    @Simon Shaw 2nd Mar ’15 – 6:23pm

    And here is me believing David Evans was a “good” Liberal Democratic…

  • Philip Thomas 2nd Mar '15 - 7:50pm

    Since the liberal oligarchs died out with the Whigs and enlightened absolutism isn’t really a British thing, aren’t all liberals democrats now?

  • Stephen Hesketh 2nd Mar '15 - 8:13pm

    Philip Thomas 2nd Mar ’15 – 7:50pm

    “aren’t [we] all liberals democrats now?”

    I would say the majority of British people are small ‘l and d’ liberals and democrats – but this is a very long way from being Liberal Democrats. It is a very important distinction.

    The former represents reasonably widespread apolitical European values, the latter a state of mind and coherent political philosophy – at least it is when our leaders aren’t confusing the two.

  • Stephen Hesketh 2nd Mar '15 - 8:43pm

    Oops … I-pad and the proximity of the ‘Post Comment’ button and the ‘auto suggest’ row strike again!

    I was going on to say/ask … Brenda Lana Smith – I am not entirely sure I have this right but is your suggestion that social democrats are ‘more socialist’ because they came from Labour?

    If so, could you explain if being ‘more socialist’ is a good or a bad thing and how it relates to your views of egalitarianism, the empowering of all citizens and support for industrial democracy and cooperative enterprise which were all strong elements in pre-merger British Liberalism?

  • Philip Thomas 2nd Mar '15 - 10:11pm

    I didn’t mean “Aren’t we all liberal democrats now?” (the answer to which is obviously “No!”, hate preachers being one obvious counterexample). I meant what I said: “Aren’t all liberals democrats now?”: all those who are liberals (in favour of freedom) are also democrats (in favour of rule that is in someway representative of “the people”). But I take the point about this being different from “Liberal Democrats”, just as not every “conservative” is a Conservative…

  • Stephen Hesketh 2nd Mar '15 - 10:27pm

    Thank you for the clarification!

  • Brenda Lana Smith 3rd Mar '15 - 12:18am

    @Stephen Hesketh 2nd Mar ’15 – 8:43pm
    Maybe this will help you et al understand where I am coming from… as a 1933 Manchester born ex-pat since 1953… and… a founding member Bermuda’s 1968 failed Bermuda Democratic Party while intent of resettling in Britain in 1986 I found SDP more compatible with my political beliefs and became a paid up member… but… having only become a resident and an eligible elector in North Cornwall since 1978 I have loyally cast my right to vote in favour of Liberal Democrat candidates… anyhow as a paid up member of the Liberal Democratic Party my political leanings are to the left of probably many of my fellow LDP peers… and… yes, I am openly a supporter of LibDems4Change…

  • Brenda Lana Smith 3rd Mar '15 - 2:23am

    Correction to Brenda Lana Smith 3rd Mar ’15 – 12:18am…
    BLS “…having only become a resident and an eligible elector in North Cornwall since 1998…” irpt 1998…

  • I believe, for what it’s worth, that the whole scheme is just another example of de-regulation for de-regulations sake….

    Those who would have a secure income will be exposed to the ‘tender mercies’ of the market…..They may well not buy Lamborghinis but there are enough ‘get rich quick’ schemes out there to make the fast car a better option…

    In my book replace ‘liberal pension freedom day’ with invitation for ‘financial advice with high risks day’….

  • David Allen 3rd Mar '15 - 9:51am

    Hi all, I think the “socialist” smear was in fact directed at me – David Evans has not posted on this particular thread.

    Well, I was indeed an SDP member originally. It’s interesting that some people think that anyone with the slightest sympathy for socialist ideas must be a dangerous lefty, while others decry the SDP as a bunch of reactionary centralisers who squeezed the life out of the brave young Liberal Party. The truth is somewhere in the middle! For me, SDP meant social justice without the socialist dogma. Of course, most of the SDP’s ideas are now 30 years out of date, but hey, not so duff as most of the dominant political “philosophies” now on the market, Cleggism certainly included!

    I don’t think “socialism” has much to do with my opposition to pension deregulation. Rather, it is the proponents of complete deregulation who are the free-market ideologues in this debate. There are, of course, advantages in giving people more freedom to take their own financial decisions, when that can be done without hurting others. There are probably ways in which some sensible deregulation could have been achieved. But that wouldn’t have satisfied the ideologues and the financial industry lobbyists who are driving this sweeping change, no doubt because there is money to be made from it.

  • George Morley 4th Mar '15 - 6:11pm

    “We wouldn’t be doing it if we thought it was a disaster, but you do take a risk when you trust people with their own money,” he says
    We took a risk paying out NI Contributions obviously but then these were mandatory and the uprating of all pensions should be mandatory as well Mr Webb.
    The LibDem’s should hold their heads in shame for condoning this shameful theft of a pensioners rightful pension indexation without any justification for doing so.

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