Election 2010: Interview with Nigel Waterson

Conservative pensions spokesman Nigel Waterson outlines his party's plans should it triumph at the forthcoming General Election.

The rationale behind public voting in this year’s general election could be different to previous years. On the back of a worrying global recession, pensions and investments have become part of the public psyche – however small – and could play a pivotal role in how the voting swings.

“I’m not saying pensions will decide the result of the election,” says Conservative Party pensions spokesman Nigel Waterson, “but I think they are far more up the political agenda than they ever were before".

Waterson is pleased this is the case because people are now thinking about their retirement in a way they were not before – something much needed to address the pensions crisis in this country.

Indeed, for a long time now the industry has called for the reams of red tape around pensions to be slashed away, so perhaps unsurprisingly the first thing Waterson criticises the current administration for is its “timid” attitude to deregulation.

Waterson says the government’s rolling programme of occupational pension deregulation has not been “rolling” anywhere recently and deregulation is critical if there is to be a future to defined benefit.

“We have to import more flexibility and less costs and red tape for employers – deregulation is very important.”

Risk sharing

Late last year the department for work and pensions announced it would take no further action on collective defined contribution – much to the displeasure of a number of key industry figures.

The Conservatives by contrast say they are approaching de-risking from “the other end of the telescope” and looking to reverse the attitude towards risk sharing displayed by the existing government.

Waterson says his party is considering a “whole range of possibilities” on risk sharing. Among these are conditional indexation – which they say has worked well in Holland; DB-minus and DC-plus; collective DC; and cash balance schemes – popular in the US.

“Classic DB is like a Rolls Royce; a DC scheme is like a Mini Cooper; but there is nothing wrong with having a Volvo in the middle,” says Waterson.

He does however admit the laws would need to change to bring in conditional indexation because “we are about the only country on the planet that has quite such rigorous mandatory indexation”. This is something the Conservatives would look to remedy, he says.

2012 reforms

“Any politician who tries to tinker with the Turner consensus does so at their peril,” warns Waterson.

However, he swiftly adds Adair Turner should have been more radical on accelerating the increase in retirement age – something Waterson points out Turner himself has since said.

The Tory Party believes in increasing state pension age over time and has already spoken of its commitment to bring forward the date at which the state pension age will rise to 66.

Waterson says the Tories also agree in principle to a cheap and easy-to-access pension savings vehicle for those on low and middle incomes who don’t have pension provision in place – so in essence it backs the National Employment Savings Trust.

Nevertheless, should it get into power, the party would conduct a quick review of how the Personal Accounts Delivery Authority has been getting on – “we hope very well,” he adds.

One thing the Conservatives do have “major concerns” about is the “lengthy delay” in implementing NEST and the costs ploughed into the process.

“It is the employers at the end of the queue that concern us – the small and micro firms – and those that are the Turner target audience who will have several years before they have full contributions paid into their scheme,” he says.

Waterson is not alone in this view. The same issue was raised by Liberal Democrat Steve Webb when he spoke to PP’s Tom Selby last week.

Waterson continues: “We are not convinced it should take quite as many years as it is supposed to so we would like to sit down with PADA, The Pensions Regulator and anyone else to ask a few questions.”

He says the party is also “puzzled” why PADA spent £350,000 on a rebranding exercise for something that has not even started yet.

Despite this, the Conservatives are not averse to the NEST brand overall and have no intention of changing the name if they get into office.

“It [NEST] has a certain appeal – a nice cosy, secure feel about it. We certainly don’t want to stump up another £350,000 coming up with another name or logo just for the hell of it.”

Fundamentally what is important, says Waterson, is whether or not the scheme will actually work – it’s not about the logo or name.

According to Waterson, the issue of means-tested benefits is still “lurking in the undergrowth” and its interaction with auto-enrolment. He says, as it stands, there will still be 500,000 people actually not better off by being auto-enrolled in NEST – and this needs to change.

“We want to try to protect existing, more generous provision,” he says, “I would not like the 8% level to become a benchmark in saving.”

The Conservatives say they will try to minimise the number of people who would be in the ‘at risk’ groups and will undertake a “body of work” on that where the old government left off.

Auto-enrolment

Waterson is keen to point out the Conservative Party had auto-enrolment in its last election manifesto and reiterates the party’s intent on bringing it forward “the sooner the better”.

“I would hope within the first week or two we would be asking for a report on what practical problems there would be on bringing it in as soon as possible,” he adds.

He explains this is on the basis of companies with existing schemes who would volunteer to do it. “So rather than wait for auto-enrolment to kick in they might well be auto-enrolled into a more generous scheme,” he says.

Public sector

David Cameron has said he will close the MPs’ final salary scheme and move to a DC arrangement but it is difficult to draw a straight answer from Waterson on exactly how the Conservatives would address the wider issue around public sector pensions.

Nevertheless, Waterson says the party will set up an “office of budgetary responsibility” to look at the level of cost and commitment to public sector pensions and work very closely with stakeholders and unions.

“You cannot talk about public sector schemes as though they are one scheme because you have funded and unfunded – no one really knows what the true costs are.”

Waterson says the approach should be to change the basis on which new people join the schemes and how they are funded over time. “That is going to be a slow process,” he says, “but that is not to say we won’t be taking it seriously.”

Whoever takes office after the election still has a massive job trying to restore the savings culture in the UK.

To aid this in some way and raise awareness of financial planning in general, the Conservative Party is proposing the introduction of the Consumer Protection Agency – billed as the first ever free nationwide financial advice service funded through a new social responsibility levy on the financial services sector – estimated at £50m a year.

Waterson says it is very important for this to build on the work of The Pensions Advisory Service.

“Pensions have taken a beating in the last 13 years for a variety of reasons – some of them the government’s fault,” Waterson says. “There is still a huge task for the new government to make people understand how long they will be in retirement and how much they will need.”

However, Waterson believes the British public is finally ready to listen to this message.