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Pension reform – The gentleman is for turning

Pension reform – The gentleman is for turning

Thirty-two years ago Margaret Thatcher rose to address the Tory Party conference with the party in great turmoil. Her financial reforms were running into severe difficulties and the downturn that had been forecast as part of the reform was turning out to be much worse than everyone had originally expected. Having been elected on the basis that Labour had increased unemployment to over one million, unemployment had risen by then to over two million and the country was very restive.

It was at this point that Mrs Thatcher made her famous quotation in response to calls for a policy U-Turn, which was ‘You turn if you want to – the Lady’s not for turning”. Whether you agreed with her policies or not, it was difficult not to admire her determination to proceed with them rather than buckle under the pressure for short-term popularity.

Fast-forward three decades and it is clear that the current government lacks the same level of commitment to its policies. The Financial Times is reporting that the commitment to a flat-rate state pension is being reviewed on the personal orders of the Prime Minister because of the risk of a backlash from those who would lose out.

This policy forms a cornerstone of the whole pension reform programme. Without a flat-rate pension and the removal of the majority of means-tested programmes, it is difficult to see why anyone would not opt-out of the new pension schemes that they are being put in via the auto-enrolment programme.

Unless means-tested benefits are drastically reduced, the majority of lower-income workers would be worse off if they save for their own pension and so it is hard to see how any employer or financial adviser could justifiably advise them to save. If true, and the FT generally has impeccable sources, this will make pension reform a dead duck and the Treasury will remain holding the liability to provide for pensions in the future.

We need statesmen, not politicians, at a time like this. People who are prepared to look at the long-term benefits to the country and risk short-term unpopularity to get it right. Pensions are the ultimate in long-term projects and if we are to be in a sustainable position in 2050, then action needs to be taken now. But it requires the government to hold fast to its policy, withstanding the pressures from different interest groups in order to make that happen.

Unfortunately, the current PM is far from earning himself the ‘iron’ epithet that was revelled in by Mrs Thatcher and the long-term welfare of the UKs pensioners could suffer as a result.

Tom Murray

Twitter: @TomMurrayDublin

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