Liberalising pensions

11 February 2015

When we entered into the Coalition Government in 2010, it gave us the first opportunity in almost a hundred years to implement liberal and sustainable long term reforms to a pensions system created by the great reforming Liberal Government of the early twentieth century.

One of the very first acts of the Coalition Government was to fulfil the Liberal Democrat manifesto commitment to introduce the triple lock guarantee to increase the Basic State Pension by whatever is highest out of: CPI inflation, average earnings or 2.5 per cent. We also restored the earnings link to pensions, which was abolished in 1980.

We have made once-in-a-generation reforms to simplify the state pension and make it fairer, introducing a Single-tier State Pension to replace the complicated current two-tier system. From April 2016, this will provide clarity about what individuals can expect as well as benefit many women, self-employed people and the low-paid. The full level of the state pension will be set above basic meanstested support, so people will have greater confidence in the value of saving into a private pension.

We are helping millions to save more through their own workplace pension with the roll-out of automatic enrolment. Over 5 million people are now in and we are expecting to enrol around 5 million more people in the coming years. To help them to save with confidence we are bringing in a cap on charges on default funds in defined contribution pension schemes.

Finally, the ground-breaking pension freedoms we introduced in the last Budget should give people the freedom to choose how they spend their pension pots – money that they have earned and responsibly saved over their working lives. We are helping people make these big decisions with clear impartial guidance from Pension wise.

At the heart of a liberal pension system lies the belief that the best person to look after your money is you. This is why we have taken the major step of releasing savers from the effective requirement to purchase an annuity with their pension pot.

The Liberal Democrat manifesto for the 2015 General Election will continue to build the foundation of a more secure and sustainable future for pensioners. This is why we will make sure pensioners can benefit from our plans to increase the income tax threshold to £12,500, and to write the Triple Lock into law, to ensure that pension rises also match or exceed increases in living costs. Senior citizens’ bus passes would also be protected, while to help balance the books, the wealthiest five per cent of pensioners would no longer be entitled to free TV licences and winter fuel payments.

We also intend to look further into introducing a single rate of tax relief for pensions, designed to be simpler and fairer and which would be set more generously than the current 20% basic rate relief, which most people currently receive.

I believe that this is a proud record of action, which demonstrates the difference which Liberal Democrats participating in government can bring.

Blog taken from Beyond April 2015: the long view on UK pension reform conference brochure

Rt Hon Steve Webb MP, Minister of State for Pensions

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