Pensions

Are you concerned about pension charges? Want to know more about the government’s pension plans and auto-enrolment?

Steve Webb, the minister for pensions, will answer questions in our live online Q&A on FT.com from 4pm GMT on Tuesday November 26.

Pensions reporter Josephine Cumbo will also take part in the online Q&A.

Email your questions to money@ft.com or tweet questions to #FTPensions

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Kiran Stacey

I wrote this week about talks between the Tories and Lib Dems about the possibility of lowering the cap for how much workers can put into their pension pots while still enjoying tax relief.

Since then a couple of pensions experts have got in touch to explain some further implications of the measure, which mean that for two reasons, it could be more controversial than I first realised.

Firstly, I suggested that people enjoying the maximum 50% tax break enjoy a 50p top-up to their pension pot for every £1 they put in.

In fact, the relief is worth even more, because the amount is a tax relief calculated on pre-tax income. So if you qualify for the 50% relief, and put in £1, your tax is waived, meaning that the government has essentially put in 50p of the £1 you put it. Cancelling this for some people would therefore be even more of a blow than I first calculated.

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Kiran Stacey

UPDATE: I have now added in housing benefit – apologies for the omission, and thanks to Paul Treloar for pointing it out.

The brains over at the Treasury are currently trying to work out if there is a way to cut billions of pounds of public spending by freezing benefits in a way that would also be palatable to most voters. As we reported last week, it looks like pensions will be exempted from any freeze to avoid accusations of punishing older people. But what else is up for grabs, and how much could be saved?

Here is a table of each of the most significant benefits paid out by DWP and how much each one costs. I’ve done one column for how much was spent last year, one for how much is forecast to be spent next year, factoring in various policy changes, and one for how much they would cost next year if there were no spending cuts and they were allowed to rise with 5.2 per cent inflation. Read more

Kiran Stacey

Labour is in a slightly difficult position about how to respond to the news in the FT today that the Treasury is looking to slash benefits by linking them to earnings or even freezing them temporarily.

Although Cameron said he wouldn’t “balance the books on the back of the poor”, Labour knows that attacking the government for hypocrisy on this point could make it look like they are standing up for benefits’ claimants – or “scroungers” as they are thought of by many people.

Instead, the opposition will want to pick its battles. At the moment, the Treasury is still actively considering applying this change to all benefits and pensions, which would affect a lot of people who don’t fall into the “scrounger”. Read more

Jim Pickard

John Ralfe, an independent pensions expert, is convinced that the National Union of Teachers has misled members in a fact sheet it gave them ahead of today’s strike.

The NUT insist that their wording is correct; not being a pensions guru, I can only present the two sides of the argument.

The key bit is near the top of the second page, “How much longer does the government want me to work?” The document says that older teachers will be affected: “Anyone aged 57 or less would have to work to 66 and anyone aged 42 or less to 67 (to get their teachers’ pension in full.)” Read more

Jim Pickard

David Cameron has just used his LGA conference speech to defend reforms to public sector pensions, arguing that his proposals are fair. He has suggested that people are being told “scare stories” about the government plans. (Here is the full transcript on the Downing St website and this is our news story).

Does he have a point?

The prime minister has claimed that there are rumours that the government is “closing defined benefit schemes and replacing them with defined contribution schemes”. He also claimed that people are being told that “we are stripping workers of the benefits they have already accumulated.”

This is not true, he points out. Not only will workers still have defined benefit schemes. They will also maintain the “final salary link” for benefits already accrued. “Any suggestion otherwise is completely untrue“.

But who is actually saying this? Anyone? Or has the PM created a paper tiger?

The scare stories are the fault of the unions, Cameron appears to suggest, without actually naming them: “they are giving really bad advice to teachers, nurses and the police officers who are wondering whether to continue with their pension.”

UPDATE: Apparently the PM is not blaming the unions per se, his aides claim. Instead this emanated from the fact that Cabinet Office has spoken to public sector staff, who say they are worried about losing such benefits. “We’re very keen to get the message across out there about what we’re really doing,” says one Downing St aide.

In fact the unions are angry about the following changes, which are not yet set in stone but are proposed by the government – as my colleague Brian Groom recently explained:

* Higher contributions to pensions that will have to be made, typically rising by 3.2 per Read more

Kiran Stacey

Yes, that headline is right. Labour, half the Lib Dems and some Tories have been calling for the timetable to raise the women’s state pension age to 65 and 66 to be delayed. This would avoid penalising 330,000 women who were expecting to claim their pensions up to two years earlier.

Labour admits this will cost money, so in order to pay for it, Liam Byrne, the shadow work and pensions secretary, has asked whether DWP has looked at bringing forward the dates on which the pension age is due to rise to 67 and 68 by two years.

It is a smart move in one way, as it avoids the accusation that Labour are full of uncosted economic policies. But it nullifies their argument that changing the system is unfair to those who suddenly see the goalposts move and their planned retirement fade into the distance. DWP officials say such a change could affect millions of people, not just the 330,000 hit by Iain Duncan Smith’s proposals. Read more

Kiran Stacey

We revealed this morning that Iain Duncan Smith is less steadfast than he might appear on when the controversial changes to women’s state pension might take effect. Under current plans in the government’s pensions bill, it will gradually rise to 65 by 2018 and 66 in 2020.

The bill is back in the Commons today, where the work and pensions secretary will say:

We’re heading towards an unprecedented burden being placed on the next generation who will have to pay for their parent’s retirement on top of paying for the national debt.  It’s not fair. This bill will address the realities of our increasing longevity by sharing the costs between the generations.

We will stand by the 2018 and 2020 timetable.

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Jim Pickard

The Telegraph and the Mail have today covered the story that the government will unveil a new universal state pension in an imminent green paper. The £140/week pension (rising to £155 in four years’ time) is roughly as anticipated when the story first broke last autumn. It is a less complicated system than the current basis state pension which can be topped up with additional benefits such as the pension credit.

What has barely been noted, however, is that the coalition nearly endured a defeat in the House of Lords on Wednesday night over its long-standing plans to lift Britain’s retirement age. Read more

David Cameron is warning that every individual will be hit by the coming cuts. But don’t expect the pain to be spread fairly across all groups. If the coalition agreement is anything to go by, the elderly will be given a free ride at the expense of everyone else.

We’re in the midst of a fiscal crisis, but there is hardly a perk left for over 60s — the most wealthy section of society (see IFS chart) — that hasn’t been protected by the coalition. Read more