Des Browne on why it’s time for the Coalition to finally wake up to the UK’s private pensions crisis
Today is the House of Lords second and final day on Report on the Pensions Bill, with attention now turning to private pensions. The earlier sections of the Bill were about the introduction of a single increased state pension, simplifying the complexity of the present structure and providing a platform on which the individual is encouraged to build – principally through private pension savings. Success however, is dependent on automatic enrolment of all workers into a scheme – a Labour reform that is going well – and the government guaranteeing the pensions market delivers for hard working savers.
It is this latter challenge that will occupy Peers today. And the context is one where families are facing a cost of living crisis, struggling to save, and seeing the value of their pensions slashed by unfair fees in a market that doesn’t work for them. A market that the Coalition has been both slow and reluctant to regulate properly.
Despite this, three simple steps could be taken to resolve this issue.
First off, pension providers should be forced to reveal the full range of transaction costs that are now devastating savings. Throughout the passage of the Bill in the Commons, Pensions Minister Steve Webb repeatedly claimed there was no need for any additional powers as the law was sufficient. But earlier this week, in the face of an onslaught led by Labour Lords and supported by Crossbenchers and at least one Tory grandee, the government crumbled before tabling their own amendment requiring disclosure of costs.
It is progress, of a sort – but the u-turn is not yet complete and with Nigel Lawson, we will press for full public disclosure.
Secondly, fees and charges must be capped. Staggeringly, the government’s own figures show individual savers could be losing as much as £230,000 from their lifetime savings. Time and time again Labour has won the argument on this issue; and on the very last day of the Bill in the Commons, following the publication of the most damning Office of Fair Trading Report, Mr Webb appeared to concede the point: “Every passing month [of delaying the introduction of legislation on pension charges] means another bunch of people who might not get put into a decent-quality scheme”. In doing so, he created an expectation that a cap would be introduced shortly, probably by April and at less than 1%.
Shamefully, the Minister collapsed in the face of lobbying by pensions companies and the government has now kicked the cap down the road for at least another year. But we will deploy the same “enough is enough” argument and press for a cap on charges to be put in place as soon as is possible.
Our third step is to ensure that on retirement, savers are offered the best deal on the market when a pension pot collected over a working life is swapped for an annual income until death. Estimates suggest savers lose up to £1bn of retirement income each year because people don’t shop around for the best deal. Report after report puts the blame at the door of the industry. But it won’t change unless made to offer accessible and best advice in a form that people understand – something Labour will press for this afternoon.
So will this be the day the Coalition finally wakes up to the private pensions crisis, and agrees to take all the necessary steps to stand up for the interests of saver? A smarter government would seize the moment but in this case, I am sad to say it’s very much a case of “Don’t hold your breath”.
Lord Des Browne of Ladyton is a Shadow DWP Minister in the House of Lords
Published 26th February 2014