Sunday, December 01, 2013

"Where next for Pension Policy?" TUC GS Frances O'Grady & Minister Steve Webb

TUC National Officer (and NEST trustee) Nigel Stanley opened the meeting.

The new TUC General Secretary, Frances O'Grady spoke first. She told us that this generation will be the first to be poorer than their parents. Things are very tough and while there is some genuine good news on auto enrolment (AE) and the state pension. We need to change the failed "market approach" economy of the last 3 decades.

While the TUC supports the general direction of travel, the starting point should be the overwhelming case for an increase in higher AE pension contributions.  We need a cap on Defined Contributions (DC) charges of 0.7% pa,  trust based governance and we must tackle systemic pension inequality. Why are top company directors paid 23% of income into their DC pensions while their workers only get 6.6%? This is profoundly wrong. Why are so many low paid workers excluded from AE?

We need employee representation on company remuneration committees to bring about some common sense on these boards.

Finally, why do higher rate tax payers take such a disproportionate amount of relief compared to basic taxpayers. Is this fair? 

Next was key note speaker, Pension Minister, Steve Webb MP.

Steve welcomed the broad support of the TUC on many of his measures. He is very proud that 2 million workers have been auto enrolled into their pensions schemes with scarcely any controversy.
He is concerned that many low paid workers are excluded but he doesn't think it is worth them paying 10p per week into a pension. It's not that they "don't give a damn" about the low paid and women.

Steve attacked the media for their coverage of his Defined Ambition (DA) and Collective Defined Contributions (CDC) proposals. The Telegraph accused him of "stealing" the indexation of pensions. He could have done nothing about Defined Benefit pensions and just watch them die. How can conditionality of benefits be worse than having no indexation at all? At the moment with DC all the risk is on the employee. What is wrong with risk sharing?

The DC collective model is illegal in British Law. Why can't we look at the Danish model where each year some of your pension is guaranteed? While guarantees have costs they are attractive to some.

He is consulting on charges and realises that he has to protect the majority who have been auto-enrolled that have never made an active choice on their funds.

He pointed out that despite the huge rise in life expectancy, the male  state retirement age is the same as a century ago. This is just unsustainable.

My question to Steve was what advise should we be giving low paid workers who when they retire depend on private renting. Many UNISON members are low paid and more of them rent in the private sector than from social landlords. I met recently a pensioner who is totally dependent on pension credit who has to pay £150 per week for a bedsit above a Chicken shop in West Ham. This man had been on low wages all his life but if he was in a pension scheme he would have had to save at least £100,000 lump sum just to get an annuity to pay off his rent.

What this means is that under AE the low paid who have to privately rent may be paying into a scheme that they will never benefit from? This is a future mis-selling scandal. What we need to do is of course increase real pay and reduce rents but... in the meanwhile?

Steve accepted that this is a problem and the decline in owner occupation has increased pensioner poverty but thinks that the housing benefit taper will still make it better for low paid workers to pay into AE, since the employer matches contributions pound for pound.

(after this we had coffee and then workshops. I will post next on the "Stewardship - taking action" workshop)
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