Steve Webb talks about how a pension age “bad decision” was resolved

We’re hearing quite a lot about the ins and outs of the coalition government these days. Yesterday it was Vince talking about his relationship with Osborne or lack of it. Today, Steve Webb has been speaking to the Institute of Government about his experience as Pensions Minister.

Widely regarded as one of the most successful coalition ministers, Steve Webb reformed the Pensions system, making sure everyone has access to a workplace pension, introducing the triple lock to stop the paltry increases of Labour years and enabling people to access their pension fund early if they need to.

He specifically referred to a situation early on when ministers and made a decision about raising the pension age and had to later change their minds when it became clear how badly some women were going to be affected.

There was one very early decision that we took about state pension ages, which we would have done differently if we’d been properly briefed, and we weren’t,’ he said.

‘Most of the time I had very good civil service support, very good people, but [on this occasion it] was very poor. So we had to make a difficult decision; we were given a briefing as to the implications of different choices. We made a choice, and the implications of what we were doing suddenly, about two or three months later, it became clear that they were very different from what we thought.’

‘So basically we made a bad decision. We realised too late. It had just gone too far by then.’

So how was this resolved?

Webb said the issue was so critical he took it straight to the top of government, resulting in a conference involving Webb, the prime minister and the chancellor.

‘And so that’s a decision that we got wrong, and in the end I had to go to 10 Downing Street, sit around opposite the chancellor and the prime minister trying to get billions of pounds back. So this was a measure to save 30 billion quid over how many years, and we wanted 10% of that back to soften the blow, and we got £1 billion back in the end, and a billion quid is a serious amount of money.’

He also acknowledged that he had described the new reformed pension in too simple terms. People had understood that everyone would receive the new enhanced rate, but this is not in fact the case:

In July it was revealed that just one in three would be eligible for the full flat-rate amount of £155.65 per week in the system’s first 10 years.

‘So I was guilty I think of selling it […] I described it in a very simple language, and actually if when we’d been thinking about the policy, we’d been thinking about how we explain it, I wouldn’t have been quite as black and white as I was, from which we then had to row back,’ Webb said.

‘It wasn’t that we were trying to deceive people, but it is just what pensions are like – as soon as you go into a tier of detail below the headline, you’ve lost everybody.’

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

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5 Comments

  • Eddie Sammon 9th Dec '15 - 9:17pm

    I wasn’t a fan of Steve Webb’s pension work. I used to be a pension transfer specialist and he exaggerated charges in order to make a political point about pension companies. At least he now admits that he oversold the new simplified pensions scheme.

    He also said this about pension providers: “Through the new measures this government will be the first to get an iron grip on pension charges. We are going to put charges in a vice and we will tighten the pressure year after year.”.

    http://www.telegraph.co.uk/finance/personalfinance/pensions/10726829/Excessive-pension-charges-capped-in-full-frontal-assault.html

    Why would someone who works in the pensions industry, not even well paid, vote for Steve Webb? Basically said he was going to make things worse for us year after year. Charges are not as high as he made out. He didn’t discount for inflation, which makes a big difference over 30 years.

  • Bill le Breton 10th Dec '15 - 9:05am

    Steve Webb is referring to a pernicious decision that impacted on a relatively small ‘cohort’ of women who found their retirement age pushed back for a second time with little or no time for them to make the necessary changes to retirement planning.

    SW is to be congratulated for gaining some funds to ameliorate this injustice, but these funds were clearly inadequate, given the statement above. He needed £3b – he ‘got’ £1b to rectify this’bad decision’.

    But where were Nick Clegg and Danny Alexander in this?

    SW refers to ‘facing’ the PM and the Chancellor … if this was not a gathering of the Quad, why not? Note that it was women facing this injustice following a ‘bad decision’, not men.

    I would also take issue with ‘it had simply gone too far’. There were plenty of noises and protests immediately the decision was made.

    On the new flat rate pension, I wrote to the Minister asking why it was not possible to allow those on the cusp of this decision i.e. those reaching retirement age either side of the introduction in April 2016 could not have the right to choose which of the schemes related to them. I received a reply, a very long reply, suggesting that the old scheme might be a better deal for a large number of people. I wonder in the light of later revelations whether this reflected knowledge that not everyone would be entitled to the full flat rate.

    Once again I believe it will be women who are the main losers under the new scheme.

    And let’s not forget that Steve Webb was one of the best of our Ministers.

  • nigel hunter 10th Dec '15 - 9:23am

    The triple lock is a good thing. However now that the over 60s have now become the “wealthiest” group in the .country because of them owning property etc. ,maybe in future the pension rise could be put at 1% lock plus inflation. The money saved could be used to expand the Open University for all . Retired people could be recruited for part time classes to augment incomes. to widen peoples education opportunities.

  • I am one of the women adversely affected because of Steve Webb. I also do not get the new state pension due to being contracted out for a few years. I get a small GMP but this will never rise with inflation and will stay the same thus losing value year on year. I have over 40 years NI but several are ignored. We were persuaded by government to contract out but that was a big mistake as now we have to deal with a double whammy. No doubt the rules will change again and I doubt in a good way. What is so annoying is the way Steve Webb sold the new pension as a wonderful thing and misled us. What awful excuses he is trying to make.

  • Eddie Sammon 18th Dec '15 - 5:00pm

    Steve Webb has just gone up in my estimations. He’s suggested a voucher service to provide free financial guidance. The problem is the original plans for all this free government financial advice have just been hitting the industry and we’ve not been benefitting at all. The free services were even paid for via industry levy as a double blow.

    A voucher system would mean we could all benefit. I had big fears about the direction of free financial advice. Especially when it was being paid for by an industry that it was damaging.

    http://www.ftadviser.com/2015/12/18/pensions/personal-pensions/webb-urges-consider-ifa-voucher-to-cut-pension-wise-cost-gY1pN8l5YTMl32K36iPIjN/article.html

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