Steve Webb writes: working for pensioners, now and in the future

When I was appointed Pensions Minister last May my first priority was protecting current pensioners. It was widely assumed that the spending review would see cuts to a range of forms of help that pensioners receive. But despite the spending pressures, the budgets for bus passes, free television licences, free prescriptions and the Winter Fuel Allowance have been protected at the level set out by the previous government. Better still, where Labour had planned to cut Cold Weather Payments to £8.50 per week we have made them £25 permanently to protect the most vulnerable when the temperature is below freezing.

We have also restored the link between the Basic State Pension and earnings which was broken thirty years ago. Labour had thirteen years to do it themselves and did nothing. Our ‘triple lock’, to increase pensions by the highest of earnings, prices or 2.5% will benefit a typical newly-retired pensioner by around £15,000 during their retirement. We are committed to the state pension, and committed to improving it.

But we also need a state pension system that works for those who have yet to retire and who will be facing a very different world. They will, on average, be working much longer and be retired longer than their parents and grandparents. Workplace pensions are far less generous than they were in the past. Few young workers are saving anything at all for their retirement. We need to put a system in place fit for the future.

A flat-rate state pension worth £140 per week in today’s money will provide a firm foundation for saving. This is crucial as we go through the process of automatically enrolling millions of workers into workplace pensions. They will be free to opt-out, but their employer will put money in, they will put money in, and tax relief will go in. People need to be confident though that their savings won’t be swallowed by means testing. A flat rate pension set above the rate of the means-test means you can be confident that it will pay to save.

Those who were heading for pensions below the poverty line stand to benefit most from this reform. It will also end the penalties facing women who stop work to bring up children or care for a family member. While those years are credited for the Basic State Pension, no provision was made for them prior to the introduction of the State Second Pension. It is time their contribution to society is fully recognised in the state pension. A year spent caring for a child or elderly relative will be worth the same as a year spent running a global corporation as far as the state pension will be concerned.

The idea of a single decent pension is of course nothing new to party members. This proposal is very similar to ideas that we as Liberal Democrats have talked about for years. The fact that the Government has now included this idea in a Green Paper shows the difference we are making through being in the Coalition. We are not just talking about good ideas but are actually delivering them within government and it is a huge privilege to be a part of that process.

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  • Nice to see a thought out policy that is focused on fairness, what can be afforded and the contribution that those who care for others give to society.

  • Malcolm Todd 5th Apr '11 - 8:57am

    Hard to disagree with any of the pension policy; but a pity that the change from RPI to CPI as the measurement of inflation, and the likelihood that RPI will continue to outstrip all three measures of the “triple lock”, means that pensions will probably be lower at the end of this parliament than they would have been if there had been no change.

  • ‘But despite the spending pressures, the budgets for bus passes, free television licences, free prescriptions and the Winter Fuel Allowance have been protected at the level set out by the previous government. Better still, where Labour had planned to cut Cold Weather Payments to £8.50 per week we have made them £25 permanently to protect the most vulnerable when the temperature is below freezing.’

    The winter fuel payment is an affront – leaving aside for one moment that it is paid to the wealthy, it is actually paid to the dead (I’m not making this up).

    Mr Webb, you may well have your heart in the right place. But this coalition is clearly preferencing the boomer generation at the expense of the young. Don’t forget that the people you are talking about have had the pleasure of a 40 year housing boom.

    So whilst this is great as far as it goes, it remains a disappointment that so far the Lib Dems are steadfastly avoiding any talk about the boomer generation arguments.

  • Duncan – unfair – this is about helping current workers when they retire, not about helping current pensioners. And the cost of the winter fuel payment to the wealthy elderly is tiny. Why not object that rich people can go to the hospital for free? Or have their kids schooled at state expense? Or visit subsidised opera or free museums?

  • toryboysnevergrowup 5th Apr '11 - 10:54am

    What of course you fail to state is that the intention of the changes taken as a whole is to reduce the overall burden on the State of pensions from what it would otherwise be – and to shift more of the burden for pension provision to individual savings. I am not saying that this is necessarily a bad thing – but it should be something that is done in the open and subject to proper debate and discussion, and not hidden by other steps as you appear to be doing.

    Given that Corporate Profits appear to be booming and teh Coalition is reducing the tax rates on such profits by 5% how about more measures increasing the amount that they have to contribute to employers pension schemes and stopping the continual withdrawal from final benefit schemes. At present all the measures seem to be helping companies to reduce their pension costs rather than increasing them.

  • Tim Leunig – Yes or no, do you think that overall the young today are getting a raw deal in jobs, housing, state support, education, pensions etc relative to the boomer generation?

  • Paul Holmes 5th Apr '11 - 12:16pm

    What I don’t understand Steve is why ‘we’ are not getting the credit for this. It is not IDS’s policy as the papers are falsely reporting. When I worked with you on the Parliamentary Work and Pensions Team in the 2001-2005 Parliament you were developing the idea of a Citizens Pension then. Later in the 2005-10 Parliament you returned to DWP issues and worked the Citizens Pension up into a major LD theme.

    Why are you not getting the credit? I know that initially we adopted the mistaken approach of ‘owning’ all the bad bits of Coalition Government that we had to accept from the Cons majority in the Coalition. But why let the Cons ‘own’ a policy which is your brain child?

    Paul Holmes.

  • @toryboysnevergrowup
    A flat rate actually *increases* the amount of state support by setting a flat rate level above the guaranteed minimum income. What the reform does is not “shift the burden” in the way that Thatcher tried to by letting the state pension wither on the vine by breaking the earnings link, but instead the reforms simplify the state pension so people know that saving will be beneficial to them. At the moment, you lose the first chunk of private savings through a complex and expensive (to administer) means tested pension credit.

    It is also important to see all the pension reforms being brought in as a whole. So in respect to your comments about employers paying into pensions, I think that’s why the government is introducing automatic enrolment which will bring huge numbers of employees into private pension schemes.

    The precise point of this reform is to give *future* pensioners a solid state pension base so that they know what the situation will be when they retire and that it is worth saving. Together with auto-enrolment that will be a substantial help to people planning for their future. The ‘pinch’ argument about Boomers is pretty irrelevant to this policy, whether or not it’s accurate.

  • toryboysnevergrowup 5th Apr '11 - 1:13pm


    A flat rate may increase the amount of state support , but increasing the retirement age doesn’t neither does changing the basis for deermining public sector pensions, neither does the effective removal of SERPs for the increasing number who have poor employee schemes. Automatic enrolment will mean more enrol in the schemes but if this is done at the expense of the level of employer contributions (where the trend has been downward for a number of years). Auto enrollment in a reduced corporate money purchase scheme may not bring an awful lot of benefit I’m afraid.

    Yes I agree you should look at what is happening to pensions as a whole – rather than as you and Steve Webb have done, just pick on the certain aspects which support your political argument.

    The overall picture is that the cost to the state is being reduced compared with what it would have been, employees are not being required to pick up the extra tab, and individuals will be required to save more for their pensions (and the Tories are not hiding this). If Mr Webb wants to tell us what all this does to how the cost of pensions is shared between the state (i.e. future tax payers), corporate and personnel sectors, compared with the current position and what it would otherwise have been – he can of course do so. Personally, I do think that there are good arguments for reducing burden picked up by the state/future tax payers, but I supect that the additional cost could be shared out in a lot fairer manner between the corporate and personal sectors than is actually the case.

  • James – Well, I take your point, but I’m afraid that the preferencing of the boomers has a direct effect on future pensions – that makes it relevant

    The stark reality is that there is a very serious problem with pension provision. It is in fact telling how little people appreciate of how expensive a pension actually is – and that oddly people don’t seem to think an income stream which costs the government and private pension schemes (and possibly taxpayers) £500k is actually a de facto £500k asset, albeit one that is not liquid.

    The point is that pensions of £20k a year would have required much a much higher saving rate than almost anybody actually managed, and that the shortfalls are being met from current tax receipts and company profits made today – all of which reduces the wealth of those currently paying tax or trying to save and invest for their own future.

    Is this the fault of boomers? I am open to the argument that people were not aware that the cost of providing pensions was not matched by the contributions and perhaps as far as they were aware, they’d paid what they owed. I struggle to believe however that the boomers did not think that the increases in house prices were harmful.

    Why is this relevant to what Webb is trying to do? Given there were a lot fewer pensioners in the 60s, 70s, 80s and even 90s than there are now (and will be in the future), the young will face the burden of that extra tax (plus housing costs) and boomers will all get a net benefit. This is not to mention that whilst the boomers got nationalised industry to employ them, the nationalised industries of today are the former private banks. Fair? I’ll leave that to you.

    The other, more worrisome, scenario is the stock and housing markets crash, because the young aren’t paying in, whilst the older generations are cashing out. We could therefore see all these pension and housing ‘assets’ slashed in real-terms value over the next 10-20 years. Good luck reforming that.

  • toryboysnevergrowup 5th Apr '11 - 2:21pm


    I agree with much of what you say, but I’m not sure I would blame it all on the baby boomers – quite a lot of the problem is due to those who retired in the last 20-30 years whose pensions have in fact been paid for by the boomers. While there are a lot of poor pensioners – there are also a substantial numbers of well off ones who have benefited from full working life final salary schemes and have been politically untouchable for a number of years. They certainly present a very good argument for inheritance taxes – and why not take away the additional personal allowance for pensioners with higher earnings?

  • Graham Gales 11th Apr '11 - 7:38pm

    How will those of us who have been retired for some years be affected? Will our pensions be increased or decreased? Will we get the standard £140 per week when it comes in?

  • Graham – on my understanding, the proposed changes for a flat rate pension will not apply to any current pensioners so you will be unaffected. It’s a simpler system but not as generous as it sounds – it will involve the same amount of money as the current system just distributed differently.

  • unfair comments-Duncan.
    Why are you so concerned about the young. Young people today earn far more than the older generation (pre boomer & some boomers) could dream about. It was always the case, that the up & coming generations taxes paid for the pensions of others. ( it’s the way the Government works) As for the housing boom, not everone is Fortunate to have owned their own house. Personally I did, and I worked all my life. Until Mrs Thatcher came along and introduced inflation, with a Bank interest of 17+ %, which caused me to lose the lot.(Business & Home).
    Start saving? Your State Pension is not enough to live on. you need some savings to help along the way.
    Pre-War baby?

  • Allan Davies 12th Apr '11 - 11:32pm

    We claim to live in a civilized society, but we cannot organise society so that we can contribute while we are young and fit, then enjoy a comfortable life at retirement age.

    All the previous comments are blaming everyone else for the mess but not trying to sort out the future.

    I was lucky enough to have a company pension scheme which was compulsory. In my twenties and thirties if I had the option I would have chosen to have the money then, Am I glad I did not have that option..

    I started work in the 1959 and worked for the same company till I retired. Things are very different now, no-one expects to work for the same company for more than 5 years, many people work for several companies at the same time, are self employed, or do temporary work.

    The only system that will give a reasonable pension under all those circumstances is a compulsory state scheme that people contribute to from starting work.

    The Danes have that system and they are rated on of the happiest nations in Europe. State pension there pays about 50% of the average wage at retirement. It is funded by high tax rates.

    why does nobody recognise this?

  • Unless state retirement pension annual April uplift are paid to all pensioners world wide Minister Steve Webb’s pension changes Green Paper does not reflect his “single decent pension for ALL” statement. The discrimination against pensioners who have fully met their NI contribution obligations but now reside in a so-called “Frozen country” and do not receive the annual April increases is a disgrace. In truth both Mr. Clegg and Mr. Webb have lied to the electorate on this matter.

  • Taking money under false pretences is illegal. Taking monies under the guise of NI contributions while pretending they will be repaid in full at some future date but not meeting that obligation – in full – is criminally unjust and wickedly wrong. The British government must be seen not to consider itself above the law if doesn’t want to be considered to have lowered itself to the level of some third world dictatorship
    If an employer attempted to hire employees on the clear understand that he may not pay them for their work, he’d soon be out of business. The British government has not taken NI contributions on the clear understanding they may never be paid back. Rebellion would have broken out long ago if they had.

    If an employer refused to pay his employees at the end of the week, having taken their labour for five days, he’d soon find himself in trouble with the law. What the British government is doing is not one iota different. It took what amounted to the labour of half a million people who now reside in ‘frozen’ countries but is refusing at the end of their working life, to repay what they have contributed by their labour.

    That money is not the government’s to keep stuck to its sticky little paws – it belongs by right to the people who paid it in. Get your hands off it and give it to those to whom it rightly belongs.

  • Well Steve you write above about pensioners heading below the poverty line stand to benefit the most. There are hundreds of UK citizens who because they retired to join loved ones in commonwealth countries and other random countries who are already below the poverty line because the government withold their yearly increases just based on location.But these pensioners you choose to ignore. These are people who have paid in the same as those in unfrozen countries and are denied there right to there full pension, this is blatent discrimination and morally wrong.You know it is because when in opposition you have said so, now you can end this injustice so please do so now, some of Britians most vulnerable citizens are really suffering.

  • Dennis Purvis 26th Apr '11 - 7:27pm

    If your concern for pensioners is genuine, please consider the plight of half a million British senior citizens, who’s pensions are pegged at the amount they first received, simply because they choose to live in (Mainly Commonwealth) countries with whom the U.K. has no reciprocal indexing agreement .
    This situation is causing great hardship for many, who now live well below the poverty level.
    Mr.Webb, this is an Unjust, imoral, and disgraceful way in which to treat people who contributed to a pension scheme which is now failing them. PARITY Mr Webb, PARITY for ALL pensioners must become your priority, if you wish to achieve any credibility for your statements.

  • Could we just once, after all this long, long time, Mr. Webb, have a good, clear, sensible, reasonable explanation, once and for all, as to why so many British governments have chosen to persist in a practice they must know to be wrong – simply wrong? It’s not as if plenty of people from all over the world haven’t made it quite clear that it is – simply – wrong so, even those most inclined to turn a deaf ear, must have got the message by now.

    This injustice has now gone on since 1946 so a baby boy born that year is now 65 and ready to retire. Did anyone tell his parents when he was born, tell him when he started work, tell him when he got married and started a family of his own, tell him when he started seriously saving for his retirement, tell him two years before he turned 65 that he was compulsorily paying into a fund for his old age that had a huge, gaping hole smack dab in the middle of it into which he could, if he made just one tiny mistake, fall with disastrous results?

    He thought he had been paying, all those years, into a useful fund that would make sure he didn’t starve and/or freeze to death in his old age, when he hadn’t, in fact, been doing anything of the kind – if he chose, in two years when he did retire, to go and live in a country designated by his government as a non-indexed country. Did anyone do any of those things? Isn’t this a lie by omission? Isn’t this, in fact, obtaining money under false pretences? Isn’t it, in fact, to any sane, reasonable, adult mind a wicked sin bordering on legal theft? Isn’t it? Well, Mr. Webb, isn’t it?

    A simple, straightforward., carefully and clearly laid-out explanation, by you, Mr. Webb, would be the first step towards ridding the British people of this horrible embarrassment perpetrated by their successive governments for over half a century. I don’t believe you can because there can be no simple, straightforward, carefully and clearly laid-out explanation simply because there isn’t one.

    If you are able, in spite of my assertion to the contrary, to come up with such an explanation, of course we would be delighted to hear it, but, please, no political or bureaucratic jargon, if you don’t mind, no bafflegab, no verbal sleight of hand…..the truth, the whole truth and nothing but the truth is what we want to hear.

  • No comment from you yet about what you plan to do regarding the injustice served upon the pensioners who have their pension increases witheld because they wish to spend their retirement with loved ones who happen to have settled in the “wrong” country. Now you have the chance to put right this discrimination but all we get is silence, what’s the problem Steve? You have had a year to put into action those promises made while you were in opposition, you know it is wrong to treat some seniors unfairly whilst others who move abroad get their full pensions. We have all paid for a full pension so we should all be treated the same.

  • Dennis Purvis 28th Apr '11 - 4:47am

    Mr. Webb,
    I have written to you before on the subject of frozen pensions, and I don’t know if you read these messages, or leave it to one of your aides.
    We are only asking to be treated the same way as other indexed pensioners, and if your stated commitment to the welfare of state pensioners is to carry any credibility, answering two simple questions would go a long way toward achieving that.
    1/ do think it morally right that some pensioners should be discriminated against just because they choose to live in a country which has no reciprocal indexing agreement with your government.?
    2/ Do you intend doing anything to right this monstrous injustice.?
    I look forward to reading your reply on this forum.
    Please Mr. Webb, if you do answer, and I won’t hold my breath, No political bafflegab about legalities. THIS IS A MORAL ISSUE.

  • I think it’s your turn again now, Mr. Webb. We’ve all had our say and now we expect you to respond. That would normally be the way of things when people are having an important debate.

  • Some time ago in one of the British papers the comment was made that if we choose to live overseas, we shouldn’t expect to be treated the same as people who have lived, and continue to live, in the UK. One of the points that needs to be made persistently is that one of the reasons so many British people now live abroad is because they spent large chunks of their lives working for British companies overseas and, as a result, have few roots in the way of property and friends in the UK. Those who have stayed at home in their comfortable houses, nipping round the pub for a pint in the evening, having a game of darts with their mates and generally living a working and family life of relative safety and peace, forget that a great army of men and women have lived lives of much less ease, putting up with the discomforts and disruptions of stepping forward to take the jobs no-one else was courageous enough to take. Make no mistake, it takes a degree of courage to take up overseas postings and the money that pours back into Britain as a result of these sacrifices is considerable. Rather than penalize us for having spent so much time in often inhospitable and sometimes downright dangerous places, we should all be given OBEs (definitely not in this case meaning Other Bu**ers Efforts) for Services to the Nation along with our properly indexed pension

  • Mr. Webb……..I’m waiting……..we’re into the weekend now… no excuses, please, for not replying as you should……..

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