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Robust pensions system may require loss of benefits, says DWP committee member

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  • Robust pensions system may require loss of benefits, says DWP committee member

UK - A member of the select committee for the UK Department for Work and Pensions (DWP) has said a loss of benefits would be acceptable if it meant keeping pension schemes working.

Speaking at a Conservative party conference fringe event organised by the National Association of Pension Funds (NAPF), conservative MP Oliver Heald was asked about the shift from the retail price index (RPI) to the consumer price index (CPI).

Heald acknowledged that while the shift would entail lower pensions for scheme members where the change was implemented, it was the only way forward.

He said the switch came about to aid companies, many of which are burdened with large pension deficits.

"The fact is," he said, "there are a lot of companies with substantial liabilities, question marks about how they meet the gap, and CPI is a help.

"If the effect of that is to keep schemes going, whether we can keep them open is more debatable. But if it keeps schemes going, it's the price of sustainability.

"It isn't perfect - it's a loss of benefits - but it's better to have a scheme than not."

When topic of the discussion moved to former prime minister and then chancellor Gordon Brown's 'pension raid', which saw Brown change tax relief rules, Heald conceded it was unlikely to be an issue the government would address, despite chancellor David Osborne's pledge at last year's party conference to make the necessary changes once the deficit had been addressed.

Heald said: "It was a disgraceful decision, but of course the amount of money involved in reversing it is so enormous that, in a period of austerity, you just couldn't do it."

When a member of the audience challenged him to at least begin the process, Heald said: "We wouldn't want to make false promises, and you're talking about well over £100bn (€115bn) [in payments]."

Joanne Segars, chief executive at the NAPF, added that ministers must plan pension policy for the long term.

She warned against the possibility of raising the threshold for workers involved in auto-enrolment from £5,000, saying the long-term implications outweighed the short-term benefits of such a move.

The Association of British Insurers (ABI) has previously spoken out in favour (http://ipe.com/news/uk-roundup-abi-on-auto-enrolment-northern-trust-transport-for-london_36484.php) of a significantly higher enrolment limit, with only workers over £10,000 immediately entered into their occupational pension scheme or equivalent.
 

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