Eagle: Sped-up reform programme adds to pension cynicism

The former pensions minister told an event at the Labour Party’s annual conference in Manchester that the move to switch public and private sector pension inflation protection from the retail price index (RPI) to the consumer price index (CPI) was corrosive for pension savings.

“Though it might take some pressure off pension funds and the public sector, I think it is being really corrosive in terms of the pension promises people are getting. And the affect will only worsen over time,” she said. “I’m really wary about that.”

Eagle also warned her successor, Steve Webb, that raising the state pension age too soon could have a massive negative impact on the perception of pensions.

“The speed at which the coalition is working – especially over raising the state pension age – is creating cynicism among people and making them less inclined to save,” she said.

She added: “I think it is pretty cynical how the state pension age increase is being done as it will affect people in their 50s. A sudden change in six years is not the right way to go.”

The current plans to raise the state pension age, as outlined by Adair Turner, would see a rise to 66 by 2024 and eventually 68 by 2046. But a review announced by Webb in June could see the state pension age rising to 66 by 2016 and the rise to 68 also coming in sooner.

At the time of the announcement, Webb and secretary of state for work and pensions Iain Duncan Smith insisted the sped up age increase was necessary “to be fair to the next generation of tax payers.”

Also speaking at the Labour conference event was John Deane, chief executive of Royal London’s intermediary division. He said his greatest fear for the UK’s pension industry was the lack of people saving and he did not think the National Employment Savings Trust (Nest) was capable of solving the problem.

“I have concerns about whether we need Nest.” He said. “The greatest need is for speed of auto-enrolment and for education.”

He argued existing products – such as stakeholder and personal pensions – would be suitable for savers.

“I would go for auto-enrolment as soon as possible,” he added. “Otherwise we are just increasing the debt – but we don’t have to do it in one big bang.”

But Eagle said: “We cannot have auto-enrolment into what already exists because what already exists does not cater for lower paid workers.

"We cannot have auto-enrolment without Nest.”