From the blog: Pensions minister Baroness Altmann of Tottenham – commonly known in the industry as Ros Altmann – yesterday delivered her maiden speech to the House of Lords, outlining the government’s thoughts on the state pension, consumer protection and what lies ahead for auto-enrolment.
After briefing the House with her personal and professional history, Altmann went on to back the previous government’s policy on state pension reform...
Source: Department for Work and Pensions
She explained the value of the basic state pension had declined almost constantly since 1978.
But, thanks to the introduction of the triple lock – which guarantees the state pension will increase in line with the highest of inflation, average earnings or 2.5 per cent – "the basic state pension was £560 a year higher by the end of the last parliament than if it had just been uprated by earnings".
However, as some pointed out:
Altmann: triple lock means state pension £560 a year more than if uprated by earnings. Hmmm. But £60 a year less than if uprated by RPI!
— Paul Lewis (@paullewismoney) June 18, 2015The new, single-tier state pension, said Altmann, will "significantly reduce pensioner means-testing".
However, she added that much needs to be done to improve understanding of the state pension, which is poorly understood due to the complexity of contracting out.
The government will carry out an independent review of the state pension age by 2017, she said, taking into consideration rising life expectancy as well as social, occupational and gender factors.
Consumer protection
Chancellor George Osborne announced this week the government would consult on the new pensions flexibilities, aiming to tackle exit penalties and ease access.
Altmann also took aim at the pensions industry when she mentioned the consultation:
Despite the strong words, however, Altmann said the consultation would give the industry and others the chance to "submit evidence of the actual reality facing customers in this new landscape".
She continued: "We need the evidence in order to inform any action that might be required to ensure the market works as intended and customers are treated fairly."
As yet there is little evidence to say whether or not exit penalties are a widespread problem, but the comments were welcomed by some in the industry:
@rosaltmann well done on consumer rights priority
— Margaret Snowdon OBE (@margaretsnowdon) June 18, 2015The minister also noted the "looming crisis" in social care funding.
She said: "The ageing population means there will be an enormous surge in the numbers needing to rely on care in coming years and there is simply no money set aside to pay for this. There is still much more to be done to incentivise saving for later life."
However, some took her comments as an indication she may have rowed back from previous comments:
.@rosaltmann discusses long-term care - doesn't mention her previous suggestion that pension withdrawals for this should be tax-free.
— David Robbins (@David_J_Robbins) June 18, 2015Calmer seas ahead?
Much of Altmann's speech seemed to support the notion that her job would be to continue the work started by previous governments.
Baroness Altmann set out her priorities: state pension reform, automatic enrolment and smooth rollout of pension freedoms.
— Josephine Cumbo (@JosephineCumbo) June 18, 2015This is likely to be welcome news to many in the industry, who called on the minister to maintain stability and calm while reforms bed in.
Speaking about the continuing implementation of auto-enrolment, Altmann said: "The hardest work is just starting as there will be many challenges in ensuring the huge numbers of remaining employers manage the auto-enrolment process. In particular, I am conscious of the situation of the micro employers."
