Steve Webb: Pensions minister with the future of millions in his hands

webb 01In a profile in the FT, Pensions Minister Steve Webb is described as “one of the Coalition’s most hyperactive lieutenants”.

Now Steve is highly efficient and has achieved a huge amount since he took on the role four years ago, but he is also unflappable and “hyperactive” is not a term I would normally use about him. And whilst the term “lieutenant” usually refers to someone who is second in command, which is technically correct for a Junior Minister, no-one in Government beats his deep knowledge of his subject.

That cavil apart, the FT challenges Steve Webb about the potential risks in the reforms to the pensions regulations, which will allow savers in defined contribution schemes to cash in their pension pots from April 2015.

He says:

The day the chancellor stood up it was clear that we didn’t have a huge amount of time.

We know that. So we do a 12-week consultation and then people say to us, ‘We want a decision. Why haven’t you decided this? And why don’t you tell us where we stand?’ That’s because we are consulting.

We have to have capacity in place on April 6 [2015] but that won’t be the end of the story. It will evolve and we’ll learn new things. We’ll try a new model. This is a process.

One focus of concern is the level of face-to-face guidance that will be promised to pensioners. Steve concedes that ‘face to face’ does not necessarily have to be ‘one to one’ and that group conversations could also play a role where people have common questions.

Later in the interview Steve says:

You won’t be surprised to learn I’m a great fan of the triple lock and I’m delighted that the prime minister said that he thinks it should go on into the next parliament.

He says he is pushing for a flat-rate tax relief on pensions contributions of 30 per cent.

Finally he comments on his proposals for collective pension plans which were flagged in the Queen’s Speech. So far no employers have expressed an interest in adopting them, but he thinks they will come on board once they have examined the details.  Savers in ‘gold plated final salary schemes’ will probably be the first to be switched into the new schemes.

Note that although FT lies behind a paywall, you can either sign up for 8 free articles per month, or answer some marketing questions to gain access. You can read the full article here.

* Mary Reid is a contributing editor on Lib Dem Voice. She was a councillor in Kingston upon Thames, where she is still very active with the local party, and is the Hon President of Kingston Lib Dems.

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4 Comments

  • Stuart Mitchell 24th Jun '14 - 8:37pm

    Why do Lib Dems keep telling us how generous the “triple lock” is, when in fact the switch to CPI means that last year’s triple-locked increase was actually less than it would have been if the government had retained Labour’s RPI-linked increase?

    It’s hard to think of any other policy that has been so blatantly mis-sold as an act of generosity while making people worse off.

  • Eddie Sammon 25th Jun '14 - 2:12am

    Hi Stuart, the RPI used to overstate inflation because it used the “arithmetic mean”, rather than the “geometric mean”. This is a problem because if prices go up by 5% one year and then down by 5% the next the arithmetic mean would show an average rate of inflation of 0% over two years, whereas in fact there has actually been a bit of deflation because 5% of the amount in year two is bigger than the amount in year one!

    Having said that, I have my criticisms of CPI and in the way the pension reforms were announced, but the move from RPI to CPI wasn’t simply a way to sneakily save a bit of money!

    🙂

  • Eddie Sammon 25th Jun '14 - 2:53am

    Hmm, my explanation is a bit simplistic, but I had to calculate inflation once and a CPI-esque method made more sense given the data I received – you can’t just add up all the increases and divide by the number of periods because of compound interest. I’m not sure what data they are receiving.

    Regards

  • @Eddie
    Thanks for that, it’s very interesting. The government certainly thinks it can save money by using CPI rather than RPI though. In its first budget in June 2010, it estimated that changing the upgrading measure for benefits to CPI would save around £5bn pa by this year, with the figure going up each year thereafter.

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