Worried about the white paper direction

It’s shaping up to be an autumn crammed full of government announcements on pensions reform, including personal accounts.

The process kicked off at the end of October with two documents - a summary of the 350 responses to the white paper consultation and the government’s reply to the Work & Pensions Select Committee’s report on pensions reform.

But these publications did precious little to move the debate on.

The government wanted to use the summary of responses as evidence there was general consensus on its plans. And reading the document you get that overall feeling of well-being. There certainly don’t appear to be any ‘show-stoppers’.

But there were three areas where my company held different views – and we weren’t a lone voice.

First, state second pension (S2P). This really doesn’t appear to have been debated thoroughly. In fact, only seven responses raised this issue. The government is now considering ‘simplifying’ S2P so it’s expressed as a weekly top up of £1.40 for each qualifying year. Whether this is true simplification, and who the winners and losers are, needs to be investigated.

We also have grave concerns about the effect of personal accounts on existing pension arrangements, and the way employers may ‘level down’. In fact we were so worried we co-sponsored research by Deloitte, which showed 70% of employers would level down.

But levelling down only gets a passing mention. The government does acknowledge these concerns, and it says it will issue research soon. Why not now? Then we can have a full and informed debate. I’m sure other pension providers, the ABI, NAPF and CBI would all welcome this.

The final area of dissent was the effect means-testing would have on whether people should save within personal accounts. This time the government gave a little more credence to other views. But it argues the overwhelming majority who save will always be better off at retirement. This is a very simplistic line to take, and brushes away a whole host of published research which shows people won’t get the full benefit of their savings.

Again, the government has the ace of further analysis up its sleeve, and again it has promised to show us this in due course.

But I worry the government is making decisions now based on information only it has seen without allowing for a full public debate. Surely, discussing these big questions openly would improve the outcome.

If the government is right, it would help them to win the argument; if not, maybe we can help.

Rachel Vahey is head of pensions development at Aegon Scottish Equitable.

The views expressed are those of the author and not those of the company she represents.