At last the coalition has published its pensions green paper, to
generally positive response. Most commentators - including
Independent Age - have given a cautious welcome to the plans to
simplify the current system. For us, the fact that a third of
today's pensioners are not claiming the means-tested element of the
pension means that the current system has failed and needs reform.
However we should be careful about at least two elements of the
green paper.
Firstly, the very complexity of the current system is hampering
attempts to understand what is proposed by way of reform. At the
moment even pensions analysts are struggling to understand how the
new proposals for a more generous flat rate pension can be achieved
without either costing more or having some 'losers' as well as
gainers. As one Conservative MP asked us, 'if cost neutral, who
loses?' Or as the GMB union puts it with more hostility, 'the real
question is what the government is taking away, not what it's
promising to provide'.
At this stage, probably only the government itself (and
particularly the impressive pensions minister Steve Webb) has the
data, analytical capacity and understanding of the current
proposals to answer this question, but it will become clearer. The
second reason we should be cautious is that the green paper does
not propose a flat rate pension outright but as an 'option' and it
also suggests an alternative, which is essentially a speeding up of
plans to phase out the current second pension.
Amid all the headlines about a £155 flat rate pension for all,
this option has rather been overlooked. It may be, though, that the
cautious heads inside the Treasury and elsewhere see this as their
banker bet if the flat rate idea runs into problems.
