Steve Webb on working with IDS: “When it comes to pensions I think he trusts my judgment.”

steve webbPensions minister Steve Webb is one Lib Dem minister who has emerged from Coalition with his reputation enhanced, praised even by such diverse admirers as The Sun, The Guardian and Quentin Letts. Today’s Daily Mail features a warm profile of him talking about his passion: pensions. Here are a couple of excerpts that give a flavour…

On working with Iain Duncan Smith

Today, he and Work & Pensions Secretary Iain Duncan Smith have become Westminster’s odd couple. IDS is renowned for his Right-wing stance on benefits and welfare, and Mr Webb is a liberal Lib Dem — but they’ve become close allies. ‘It’s actually Iain’s 60th birthday today,’ remembers Mr Webb. ‘I didn’t send him a card, which is remiss of me. It’s not a political statement, I forgot to send my goddaughter one recently, too.

‘I respect the fact that as an ex-leader of the Conservative party, he could have just gone off, not had any other grief or hassle and been a director of a dozen firms and had an easy life. But what does he do? He sets up a think-tank and devotes himself to social reform of the benefits system. You’ve got to respect that dedication. It helps that we’ve been working together for four years now. We can look back and say: yes, that was a success. When it comes to pensions I think he trusts my judgment.’

On the Budget’s pensions shake-up

Most recently and dramatically, he was the man behind the Budget’s revolutionary shake-up that will allow everyone the right to take their pension as cash, and avoid being ripped off by taking an income for life — an annuity. … Mr Webb brands the recent Budget reforms on annuities a real Coalition triumph. And it stemmed from his brainwave.
It was after the plans for the flat-rate state pension were finalised that he first started talking loudly about the need to get rid of restrictions on how much cash people could take from their nest eggs.

The logic was that with no more means-tested benefits for pensioners, it meant that if people spent their nest eggs all at once, there would be little extra they could claim from the state.
He began cautiously sounding out the Treasury about removing the caps on drawdown schemes (a type of pension that allows retirees to take their pension in chunks). But when an investigation by the City regulator the Financial Conduct Authority into the way annuities were sold found widespread problems, it made reform even more critical.

‘The things that had been stopping us before were the means testing of benefits for state pensioners, and paternalism. All the rules we had were based on the old pension system. So the new single-tier pension makes all this possible. I’m not the minister responsible for annuities. But because we had all these pots that we are going to create under auto-enrolment, I had very strong views on the subject. So I’ve been banging on and pressing for action. I’d suggested an annuities task force and we had agreed we were going to announce something in the Budget. The Chancellor was very enthusiastic and decided to go further.’

George Osborne’s announcement shook the insurance industry. Since then, the debate has been over whether retirees can be trusted not to blow their pensions on a Lamborghini.
The day after the Budget Mr Webb hit the headlines when he said he did not have a problem if retirees spent their entire pension on this fast car.

‘Because of that comment I managed to get on page two of the Sun without a scandal. For a government minister I take that as some sort of achievement,’ he jokes. ‘It’s worked out fine because although most people can’t buy a sports car, why should I tell people what they can spend their money on? That’s an important issue that’s been highlighted.’ Yet it must be frustrating for a man with an economics degree to have to admit that there is no research to prove they won’t.

‘What you can look at is how people spend the tax-free lump sums they take from their pension. Many people don’t spend all that, and a quarter don’t even take the lump sum,’ he adds.
He is working on plans to ensure that everyone who retires gets guidance. Part of this could include showing pensioners figures showing when they might die. He adds: ‘People have a very poor estimate of how long they might live for. But that is fundamental to understanding how you might spend your pension.’

On how state pension changes benefit women

In opposition, he had been a fierce campaigner for women’s pension rights, fighting to ensure mums were not penalised for taking time off work to raise a family. Now though, around 700,000 women born between April 6, 1951 and April  5, 1953 feel as if their champion has betrayed them. They are being forced to work longer because their retirement age has increased, but they will still miss out on the new flat-rate state pension.

Mr Webb leaps from his armchair, grabs a sheet of paper and a pen and begins scrawling a chart. It shows how women who retired before 2010 had to pay in 39 years of National Insurance contributions to claim a full state pension, but could claim their state pension age at 60. Those retiring between 2010 and 2016 need just 30 years of contributions, but will claim once they are between 60 and 63. Then, post 2016, 35 years of contributions are needed, and retirees will be aged 63 and upwards — but these will claim the new flat-rate state pension.

From 2010, those claiming state pension have also benefited from the triple-lock, which promises it will increase each year by the higher of either wages growth, inflation or 2 per cent. ‘You tell me which of these groups you think is better off?’ says Mr Webb. ‘You’d be hard pressed to tell me which one it is. Do I understand why they feel angry? Absolutely I do, partly because they think that if they retired in April 2016 they would get £144, when actually they wouldn’t on average.’ This is because they would not have contributed enough National Insurance. Mr Webb says he is sympathetic because they didn’t know their state pension age was changing, as this was a change made two decades ago — though not made widely public at the time.

You can read the full profile of Steve Webb here.

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  • How anyone can be proud to work with IDS is beyond me.The man who has wasted a fortune on a unworkable UC.His WP is next to useless.And citing the Mail,well,have we truly gone that right winged.

    The man who has made food-banks,a necessity in 2015.People sanctioned by Job Centre’s for next to nothing.

    My Father served on convoys for the whole of WW11.I think he would be ashamed of what has happened to this country since 2010.I certainly am,and I voted LibDem.And just going on blaming Brown and the last Labour Government is getting tedious.We have been in power for 4 years,well coalition that is.And 2008 was a global recession.

  • Jonathan Webber 17th Apr '14 - 9:38am

    Ten days ago Steve Webb spoke to a gathering of leading pension industry experts here in Birmingham. An event organised by the West Midlands Regional Executive and one at which I was present, let me say what a profound pleasure it was to see a Minister in complete command of his brief, and a Minister who happens to be one of ours, a Liberal Democrat.

    While I may find the language and deep substance of pensions to be arcane the industry does not and there should be no doubt as to the respect shown to the Minister for his knowledge, innovation and longevity.

    When I think of IDS (which, let’s face it is never) I assume he works for Steve Webb.

  • His announcement this morning about pension providers sending us letters telling us when we are likely to die has not gone down well. The fear is, what happens if we go past the date? Nothing would surprise me as we are all now economic units and not people.

  • “I respect the fact that as an ex-leader of the Conservative party, he could have just gone off, not had any other grief or hassle and been a director of a dozen firms and had an easy life. But what does he do? He sets up a think-tank and devotes himself to social reform of the benefits system. You’ve got to respect that dedication. It helps that we’ve been working together for four years now. We can look back and say: yes, that was a success”

    When it comes to the GE Lib Dems won’t be able to blame every unpoplar measure on the Tories, not when you have a LibDem minister working side by side with IDS and praising his success. You have to admire his honesty though.

  • “He sets up a think-tank and devotes himself to social reform of the benefits system. You’ve got to respect that dedication”

    These reforms are pernicious and carried out by IDS for purely ideological reasons – to shrink the state and to hammer the poor and disadvantaged into Victorian levels of deprivation. I don’t think admiration is an appropriate response.

  • Phyllis reminds us of the facts .

    It just shows the corrosive impact of working in Coalition with the Conservatives that someone as bright as Steve Webb feels the need to say flattering things about such a political opponent.
    As for Mr Duncan Smith setting up a so-called “Think Tank”, surely Steve Webb was aware at the time that the Conservative Party had an embarrassment on their hands when he ceased to be leader of their party and so they rapidly threw together this “Think Tank” as a device to distract people from the memory of his failure as leader?

    The Conservative Paty is very good at removing failing leaders and finding a plausible role for them. Face saving can prevent former leaders being a nuisance. Maybe that is a positive lesson we could learn. Anyone fancy a “Think Tank” run by Nick Clegg?

  • Steve Griffiths 17th Apr '14 - 1:23pm

    @John Tilley

    “Anyone fancy a “Think Tank” run by Nick Clegg?”

    I suspect that would look rather like ‘Centre Forum’ does now; the only difference being that Nick Clegg doesn’t run it……yet. No doubt a think tank run by Jeremy Browne would look exactly like Keith Joseph’s ‘Centre for Policy Studies’. in the 1980s.

  • Steve Griffiths
    I think you are right. Indeed, a think tank run by Jeremy Browne would not only look exactly like Keith Joseph’s ‘Centre for Policy Studies’ it would probably be funded by exactly the same people.

    But Jeremy Browne is a side-show whilst he remains a member of the Liberal Democrats. It is Nick Clegg for whom ŵe have to find suitable grass to be put out to. Maybe following his tour of the drugs capitals of Latin America he could head up a commission on drugs?

  • Chris Manners 17th Apr '14 - 3:36pm

    “, why should I tell people what they can spend their money on? That’s an important issue that’s been highlighted”

    Right, so no other economic considerations to this policy then.

    You helped reduce the debate to a childish soundbite.

    Well done.

  • Showing once again the Lib Dems are as evil as the Tories…

  • Still insisting in ripping off all pensioners retired by 6 April 2016. Pd 44 yrs NICs and getting £37pw less. Worse still, those who have only paid 35 yrs NICs are to get up to £60pw less, compared to STP recipients. This is disgraceful, and you should tell all Xisting Pensioners they will be worse off. No good you keep on about average pension of £144 pw, because this figure you keep quoting includes Second State Pension or SERPS, which is paid for separately, and in addition to Basic State Pension. Look at the Pension Service letter sent to each pensioners each year, and showing them this years figures. It shows first of all Basic Pension amount, and underneath Additional St.Pensions or SERPS etc on a separate line, which are then added together This is what pensioners understand, but you try to mislead us, by adding things together. I thought Pension Minister, you were supposed to inform all pensioners how the new STP works, which will confirm to current pensioners, that they are to lose out. Loss of £37pw or £1924pa is substantially more than Triple Lock each yr, Xmas £10 Bonus or Winter Fuel Allowance of £200 per household and Bus Passes combined. How you can say costs to Gov will be less each year when the new starting rate for STP is higher, for only 35 yrs NICs, substantially less than millions of current Pensnrs who have paid 44 yearsNICs to join. Plus no doubt you include Pension Credit in costs which actually have not been paid for, and are a Welfare Benefit and not a pension? Why not be straight this time Lib Dems and not forget your promise of a Citizens Pension for all. We have been told the Recession is now over, and as the STP does not start until 2016, how about the same Basic Pension for all, subject to the usual pro rata reductions all ready in existence for each category. Your move Steve, but the election is not far away now, and you will have to instigate the start now, because nobody will believe the LibDem Election Manifest, based on your previous manifesto history!

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