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EDITIONS
Thursday, 21 November, 2002, 08:52 GMT
'Radical change' is needed
Steve Webb
Steve Webb is a professor of social policy

The government will be shortly unveiling its green paper on pensions reform. BBC News Online has asked leading political figures for their opinions. In the first article, the Liberal Democrat spokesman for Work and Pensions Steve Webb outlines how he would solve the pensions crisis.
Four years on from the publication of the Government's first green paper on pensions, which told us that "pension reform is essential" we now await another green paper which is likely to remind us that this is still the case.


Big ideas are needed and they are needed quickly

Steve Webb

As reports of the "savings gap" gather pace and increasing numbers of final salary schemes are closing, the fear for many workers will be that a green paper, followed by legislation, followed by action, will come too late.

It is highly likely that the latest green paper will lack the big ideas necessary to address the immediate problems. Big ideas are needed and they are needed quickly.

To establish a decent foundation, and reduce the levels of means testing, the basic state pension should be increased, particularly for older pensioners.

Compulsion

The current state top-up - the State Second Pension (S2P) should be scrapped. Whilst existing entitlement would be protected, under the new system, low earners, carers and disabled people currently building up S2P rights would instead accrue corresponding rights under an enhanced basic state pension.

For moderate and higher earners we would ensure that everyone builds up rights either in a company pension or a stakeholder pension. This would ensure that about six million people had a private pension of their own for the first time.

We believe that employers, employees and government all have a role to play in this. One possible model would be a mandatory employer contribution together with a mixture of additional contributions from employees and government to bring this up to a decent level.

Rights for women

A priority is an investigation into the present and future pension rights of women. In particular, we would look at the position of those working age women who have paid, and in many cases are still paying, the married women's rate of national insurance.

The working age women who have been affected must be warned that their state pension rights have been reduced. They must also be given the option of topping up their state pension by 'buying back' the reduced rate years.

We would introduce a number of new measures to strengthen the rights of those in company pension schemes.


A green paper that fails to address the problems would be unforgivable

Steve Webb

We would press for early and extended implementation of the EU directive on Information and Consultation. The directive will oblige employers to consult employees before changes are made to pay and other conditions.

To protect members of wound-up schemes we would create a fast-track process to ensure that more of the fund goes to scheme members and less is lost in wind-up fees.

Following a wind-up we would seek to prioritise the protection of pension rights for certain scheme members. This could be done on the basis of prioritising those nearest to retirement or on length of service.

We would introduce a number of measures to drastically simplify pensions, particularly by scrapping the complexities of 'contracting out' which will cease with the abolition of the State Second Pension.

We would ensure that 'flexible retirement' became a reality through a number of measures.

Cliff-edge

Legislation to tackle age discrimination is planned for 2006.

This is not acceptable - it must happen sooner. In addition we would put a stop to companies imposing fixed retirement ages. If you can do a job, you can do a job; arbitrary age cut-offs should not come into it.


We must adopt a programme for radical change now; otherwise there may be little left to protect

Steve Webb

We would also scrap the tax rule which prevents people from drawing a pension from their employer whilst continuing to work for that employer on a part-time basis.

Scrapping the rule would allow many to escape the retirement 'cliff-edge' of moving from full time employment into full time retirement. The inflexible rule, which requires people to buy an annuity by the age of 75, would also be scrapped.

Concerns over retirement provision can be ignored no longer. So far the government's pensions policy has largely been to hope that things will sort themselves out; they haven't. A green paper that addresses the problems may be too little, too late.

A green paper that fails to address the problems would be unforgivable. We must adopt a programme for radical change now; otherwise there may be little left to protect.


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20 Nov 02 | Business
20 Nov 02 | Business
20 Nov 02 | Politics
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