Below is the text of the speech made by Stephen Timms, the then Minister of State for Pension Reform, to the NAPF Conference in Eastbourne on 17th November 2005.
I’m grateful to Robin and Christine for the opportunity to be here this morning. I last spoke at an NAPF Conference in a rainstorm in Eastbourne, about six years ago, so I am delighted to be here on a beautiful autmunal morning today. And I’m grateful to the NAPF for all its contributions to the National Pensions Debate, on top of all the vital work it has been undertaking for over eighty years in guiding and supporting occupational pensions. We have been very appreciative of all the support and the creative generosity we have received from this Association – and from the industry more generally – in our preparation for pensions reform over the past months. And nobody who has seen the newspapers this morning will be surprised that its my view that we are going to need a good deal more support and advice in the months ahead.
Somebody told me a story from the 1950s at one of the recent National Pensions Debate events. William was over 80. He had started work on the farm at age 10. He’d wintered it and summered it, man and boy. And one day the young farmer said to him:
“William, you started on this farm with my grandfather, then you worked for my father, and now it’s me. 70 years faithful service. You have your State Pension I know – but I have decided to give you a few shillings a week, so that you can retire. How would you like that?”
“All right,” William replied, “if you want me to give up, I will. But mind you, if I’d known this job wasn’t permanent – I wouldn’t have started it!”
Actually, I haven’t found many people during the National Pensions Debate with that approach to work – my job as Pensions Minister would I suppose be a good deal easier if I had. But I do welcome the NAPF guide “Extending Working Lives: Adapting Pensions for an Older Workforce” to help trustees and managers through the age discrimination legislation and to attract a more age-diverse workforce. It’s a good example of this association supporting and encouraging the good quality occupational pensions which have put Britain in a position today where retirement incomes are better relative to everybody else than has been the case in the past, even though earnings have been rising so fast over the past few years.
The challenge of pension reform is one of the biggest we face in the months ahead. It is a challenge we relish, and I’m looking forward immensely to working hard with everybody here to get the key judgments right over these next few months. How to ensure we achieve a long-term approach balancing adequacy with affordability; continuing our successful drive to reduce pensioner poverty; making the system more understandable but also correcting historic unfairness, such as the way women have lost out because of a 1940s view of women as being dependent on their husbands.
Our aim is a ground-breaking political consensus, and we hope the National Pensions Debate will help us achieve it, working with MPs from all parties, not because we want to avoid a row, but because only a consensus can deliver the confidence – that we see as vital – that we are introducing a framework which will endure. We want to engage with insiders, experts in this association and elsewhere, and also with those who have never thought about pensions in their lives before but are increasingly realising how important it is for their future that we get these judgments right.
I am very enthusiastic about the task ahead, so that we can come forward with the Government’s response to the Pensions Commission report by about the Spring of next year. And I am looking forward to actually reading the Pensions Commission report – published in just under two weeks time – and comparing the real thing with the newspaper reports which have appeared today!
And once the report has appeared, we need to step up the debate in which with its proposals for a citizens’ pension this association has played such a creative part.
Whatever the form of the state underpin which is adopted, it will for most people be the savings they make on top which will determine whether they achieve the income in retirement which they are aiming for. This has been the rationale for all our informed choice measures designed to inform people and make it possible for them to take control of their retirement planning.
As we embrace social and economic change; as people find themselves doing ten jobs in a career instead of one – or even having several careers – the support people require to stay in employment and to build their retirement income must also adapt to reflect fundamental changes in our society.
That’s why we are renewing the welfare state – with welfare reform proposals in the New Year that will go further in tailoring the support we provide to meet the new demands of individuals in the 21st century. And it’s why concepts such as portability and risk-sharing are becoming increasingly important for the success of private pension provision.
But two truths remain. First – work is the best pensions policy. We can’t tackle inequality of outcome in retirement without also tackling inequality of outcome during working life. And the workplace is the key. That’s why our aspiration of an 80% employment rate is so important. And we’re making progress – yesterday’s employment statistics showed the national employment rate back up to within a whisker of 75% – with 123,000 more people in work this quarter and over 330,000 more than last year.
The shape of the welfare state is crucial in the way we support people to prepare for retirement. To meet the challenges of supporting an ever healthier – but ever older population – we can’t afford to be denied the skills and contributions of all those who can and want to work. Our welfare reforms will be designed to capture this potential. The reforms will develop active support to help people contribute; they will be underpinned by the values of inclusiveness; they will balance rights and responsibilities. Respect for the individual will be matched by respect by the individual for society; and the need to help people lift leave dependency behind while continuing to provide support for those who simply can not work.
In all of this, nothing can be allowed to detract from the paramount importance of employer-sponsored pension provision. Employers are key and will continue to be the key to successful long-term pensions reform. It is impossible to envisage a successful future pension system which does not have a central role for employers at its heart.
The evidence speaks for itself. In 2004, nearly 80% of funded pension contributions came from employers. An employer contribution adds value to the pensions saving of an individual – and it acts as a catalyst for action from the employee too.
Research published earlier this month shows that with little or no employer contribution, the provision of information and advice alone in the workplace had very little impact on savings behaviour, on pensions knowledge or on attitudes towards pensions. It is very striking that the average take-up of a stakeholder pension where there is an employer contribution is around 70%. Where there isn’t a contribution it’s 13%.
Today’s NAPF survey again shows that participation rates are higher where employers operate auto-enrolment. Our own case study research has also shown auto-enrolment to be effective for increasing pension scheme membership, reducing administrative burdens for employers and pension providers and also making the whole process simpler for employees.
So I’m grateful to NAPF for vital pro-active work in supporting occupational pensions and in offering guidance to schemes to help them understand – and sometimes benefit from – new legislation. The new NAPF guidance on clearance is a good example. And all that work is going to be just as vital to our success in the future as it has been in the past.
The contribution of the new Pensions Regulator is making sure that pension liabilities are being treated with a new seriousness today, and that is very welcome, but it isn’t blocking corporate re-structures. The case of Marconi is particularly encouraging – the takeover has gone ahead in a way that promises opportunities for employees; the shareholders are satisfied; and the trustees, who took independent advice, are also satisfied there will be appropriate protection for members’ benefits.
The Pensions Regulator will continue to examine each case individually, to find solutions to enable corporate activity to go ahead, while ensuring that scheme members benefits are protected. And that balance of economic dynamism with protection of members’ benefits is a key one.
The introduction of the Pension Protection Fund has provided a new and vital security for pension scheme members, helping build a renewed confidence for the future. I know that the board of the Fund understands very well how important their decisions about the Fund levy will be for all the schemes represented here, following the recent consultation.
Your survey today shows that the regulatory burden is one of the main concerns that schemes have over the next few years. We are determined to remove unnecessary regulation and simplify regulatory burdens wherever we can. We have set out one of the most radical programmes of regulatory reform anywhere in the world.
Over the next three or four years, this will deliver year on year reductions in administrative burdens. We will set targets for reducing the burdens arising from requirements for businesses to provide information. A rolling plan of simplification will focus on removing or merging regulation into a more manageable form; resolving overlap and inconsistency; and wider deregulatory measures too.
We can’t do this on our own – and we don’t want to try to. We can only get this balance right with your support. That is why I’ve established a Better Regulation Stakeholder Group with representatives of the pensions, insurance, and financial services industries. I’m pleased that Joanne Segars is a member of it and has volunteered to sit on the sub-group looking at the measurement of information burdens. We need all the help we can get to deliver the simplification that all of us want to see. So I will welcome from anybody here thoughtful, practical proposals for removing and simplifying regulatory burdens.
Setting up the new Trustee panel is another example of our seeking to keep under review the balance between regulation and member protection. Most recently our discussions of the draft Member-Nominated Trustee regulations really brought home to me the panel’s value. The members of the panel see issues from a more direct and personal perspective which is of great benefit to me and my officials. It gives me the opportunity of a reality check on some key issues of the moment. And its their view about what is important – I don’t set the agenda, it is very much their forum.
Socially Responsible Investment
That previous NAPF conference I spoke at was at the point where the Disclosure Regulations on Socially Responsible Investment were about to come into force. In my Ministerial roles across government since then I have maintain my interest in socially responsible investment and corporate social responsibility, and now back at DWP I am keen to see how the disclosure measure has worked in practice and what we can do to move things forward again.
So I am looking forward immensely to working with everybody here to strengthen and renew workplace pension provision, and to strike the right balance between regulation and protection.
We need the NAPF to be banging the drum for occupational pensions in the coming months – and I know I can count on you to deliver. In supporting employees who choose to work longer; through a renewed welfare state that enables people to lift themselves out of dependency; through contributing to and supporting employees in building their retirement savings – in all these respects, the workplace holds the key to the challenges of an ageing society.
If together we can harness the potential of the workplace:
– we can give people the support they need to escape long-term dependency
– we can empower people to take control of building an income for their retirement
– and we can look forward with confidence to the benefits and opportunities of longer and healthier lives.
We can build a new framework for pensions in the UK which will endure for the long term. I’m up for it. I know you are too. Let’s work together.