Defusing The Nations Savings Time Bomb Part I

Defusing the nations savings time bomb: Part I – Pensionfinder

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    Defusing the nations savings time bomb: Part I

    Steve Webb, Coalition pensions minister, says workers who manage to put a provision on top of a state pension are achieving something special

    When Steve Webb was in opposition, he enjoyed a nice office overlooking the River Thames. Once the Liberal Democrat MP made it into power as the Minister of State for Pensions, he got thrown into a tiny room with his only light being of the artifical variety.

    On top of this, he manages to find himself in the midst of the largest reform regarding pensions in over 60 years. Liabilities have ballooned as high as £1.2 trillion in the public sector and £239 billion in the private sector due to the rise in life expectancy and overly generous final salary pension schemes. Webb has also been told that a £23 billion headache awaits him should BT’s pension scheme go bust. His job is to provide a pensions system that is affordable and he is forced to consider ways for people to gain access to their pensions early with the government also promising to end the requirement which forces people to buy an annuity at 75.

    It is estimated that 10 million workers in the UK have no pension plan as it becomes clear that not enough people are saving for retirement. In 2017, all employers will be forced to shell out for workplace pensions with staff automatically enlisted in schemes unless they elect to leave them. You would imagine that this means that one solution is to force people to work until they reach 70 years old.

    Not so according to Webb. He mentioned that the Secretary of State, Iain Duncan Smith, already suggested that increasing the state pension requirement age to 70 will not be considered. Instead, they will raise the age where people can receive the state pension incrementally, starting with 66, then 67 and so on. As Webb already has seven years working on all things related to pensions with the Liberal Democrats before entering government, he has the credentials to suggest that he can make his reforms work but will he?

    He admits that the pensions scheme is extremely perplexing and understands the confusion and frustration of workers who don’t know what they are getting from the state or their pension pots. His mission is to make pensions more understandable and to start off his reform measures, he intends to get workers involved in occupational pension schemes. He hopes to have a situation where hordes of workers will have a pension provision on top of their pension provided by the state which Webb asserts would be a great achievement. He says that it is vital to change the culture that exists in the UK where people don’t have adequate pensions.

    He admits that businesses are concerned about the 2017 scheme that will auto-enrol workers and this is currently under review. It will be a major shift in the culture of the UK but Webb insists that the government are serious about it. He says that the Coalition’s goals include world peace and the automatic enrolment of workers in pension schemes. The new workplace scheme known as the National Employment Savings Trust (NEST) was originally designed by the Labour government but could still be introduced with alterations. It is geared towards companies that have no pension scheme though any business that wishes to utilise it can do so.