As most readers of this blog will know by now, I have been appointed Minister for Pensions in David Cameron’s new government.
Having spent so many years studying pensions, savings and retirement policy as an independent expert, I have the chance of working inside government to drive things forward. It will certainly keep me busy and be a great new challenge.
Recent years have seen sweeping changes to our pensions system, changes which have started to move pensions in a positive direction for the first time in years. I now have the responsibility of continuing and building on this momentum.
Believe me, I am aware of the hard work that lies ahead. I want to make pensions work better, be more easily understood and more popular. For me, pensions have always been about people, not just about money and I will always try to bear that in mind in my policy deliberations.
We must continue to ensure today’s workers can save for their retirement with confidence. Automatic Enrolment has encouraged more than five million people into a workplace pension – but we still have a further five million to go, as the system continues to roll-out. Opt-out rates have been encouragingly low, but so are the minimum contributions and of course we will need contributions to increase over time.
This is hugely important – most of us can expect to live longer than ever before and must save for our futures if we are to enjoy our later years in relative comfort. I am aware of the challenges of making the second half of the Auto-Enrolment roll-out go as smoothly as the first, and am conscious that the particular needs of smaller and micro employers have to be considered.
It has been really encouraging that the youngest workers have been those least inclined to opt out after being enrolled. But we mustn’t become complacent – we need to do all we can to ensure protective measures are in place to cement people’s trust in their pension investments and encourage engagement.
We need to improve consumer protection and financial education to help people understand more about getting a fair deal and the value of saving. As successful as Auto-Enrolment has been up to now, we cannot just assume the job is done.
I believe passionately that the new pension freedom reforms have made an historic difference in allowing people to make the most of their hard-earned savings. They provide consumer choice for all, not just the wealthiest, rather than forcing most people into buying an annuity that may not be suitable for their needs.
I have been saying for years that we must trust people with their own money – and I believe most British savers will be responsible when it comes to making these long-term decisions. With the help of Pension Wise guidance, improved financial education and ultimately advice, many more people can make sensible decisions for themselves. Encouraging more later life working, particularly part-time, also has the power to benefit many people if they want to increase their lifetime income.
Towards the end of the last Parliament, the Government announced that the new pension freedoms could be extended to those who already have annuities – I very much hope this will become reality.
Next April will see the roll-out of the new State pension. This long-overdue reform will see today’s complicated multi-tiered system of basic and additional State Pensions ultimately replaced with a clearer, fairer, single-tier payment. People need to understand what is happening to the State Pension and we must try to explain it more clearly, despite the complexities of the existing system.
It will benefit many – but it is not yet fully understood. Importantly, it will bring an immediate and significant reduction in the proportion of pensioners on means-testing. I have long warned that we must reduce means-testing penalties, so that people, especially the poorer pensioners, are not penalised for past saving or for continuing to work longer if they wish to. We need to incentivise private provision, rather than penalise it.
And this is all just the start. My in tray is ever growing and I can expect a busy and exciting time ahead. Please give me some time to settle in, consider the landscape and work my way forward with the tasks that need to be done. I will do my very best to help in as many areas as I can, but I cannot make any announcements at this stage and it is not reasonable to expect instant action. It will take a while to assess what is best.
Due to the demands of my new role, unfortunately I won’t be able to maintain this blog for a while. But don’t expect to stop hearing from me!
From inside Government I intend to remain dedicated to championing the rights of consumers and standing up for fairness, while working closely with the industry as we all adapt to the changing pensions landscape. Ultimately, it will benefit everyone involved in pensions if we can find ways to improve customer experience and satisfaction.
It’s an exciting time for the world of pensions and it is essential we continue the progress for today’s pensioners as well as for future generations. I will try hard to make pensions work better for people and hope to be able to make a real difference. I would like to thank all of you who have offered me your support, kind comments and warm words – I will do my best to achieve success.