4 min read
This week on The Rundown we’re asking – can the government avoid a pensions crisis? Most analysts think the UK’s retirement industry is at a tipping point, and without bold and meaningful reforms, even if they seem politically unpopular, then the time bomb ticking underneath the pensions system will go off, and sooner than you think.
To discuss how ministers can ease the financial burden of the current state pension, while making sure younger workers will still have enough savings to retire comfortably, on the panel is Guy Opperman, the former Tory MP who was the UK’s longest-serving pensions minister from 2017 to 2022.
Alongside him is David Willetts, president of the Resolution Foundation think tank, who also sits in the House of Lords and was himself a minister, and Jonathan Cribb, associate director at the Institute for Fiscal Studies and leads on their pensions programme.
They look at how auto-enrolment and other policies can be improved, how to tackle the generational inequality created by the current system, and whether decisions about such a long-term issue should be moved beyond day-to-day party politics.
Also appearing on the episode is Baroness Ros Altmann, another former pensions minister, who said the industry needs to rise to the challenges facing it, and not wait to be prodded into it by ministers.
“The pensions industry is waiting, usually they ask government, to say ‘please tell all our customers to give us more money’,” she said.
“I don’t get it. If what they’re offering their customers is so great, why are they not reaching out and saying come on, why don’t you have more of this great thing that you’ve got called a pension?”
Altmann was critical of the Chancellor’s decision to remove inheritance tax exemptions for pensions, and said Rachel Reeves needs to work with the department for work and pensions more on increasing economic growth, not using it as a way to generate more tax revenue for the Treasury.
She explained: “What I would say to both Treasury and DWP is, why are we spending 70 billion pounds every year on putting money into people’s pension schemes in terms of tax and I reliefs, and not ensuring that a penny of that supports British growth?”
“So you don’t have to have massive change and upend the whole system to get money from pensions into producing better growth and boosting our financial markets, which itself will enhance the performance of the economy.”
Lord Willetts told the podcast one of the ways the government could improve pensions was to remove the so-called ‘triple lock’, which sees the state pensions rising by the highest of either inflation, average earnings, or 2.5%.
He said with pensioner poverty at far lower levels than in previous decades ministers “should declare victory”, and say the policy has “achieved what it was supposed to achieve”, and is no longer needed.
It is one of a number of politically difficult decisions the Starmer administration could make to avoid running into difficulty in this area, with an ageing populating and fears the younger generation are not saving enough for later in life.
Opperman said the government was unlikely to scrap the triple lock, saying they were “petrified of the older voters”, and instead called for a new commission to look at this and other issues like pension credit, which he balled “a disaster area”.
“There is a lot that they could do in this space, and that would then encompass as well a specific look at intergenerational fairness and the consequences of so much of these actions,” he added.
“And genuinely, then you would have all political parties put under pressure by think tanks and journalists to say come on, there’s a proper cross-party pension commission.”
The Rundown is presented by Alain Tolhurst, produced by Nick Hilton and edited by Ewan Cameron for Podot
- Click here to listen to the latest episode of The Rundown, or search for ‘PoliticsHome’ wherever you get your podcasts.
