Pensions freedom and 5 years of Liberal Democrat pension changes

The new financial year, from 6th April, marks the largest overhaul of the pensions system in almost a century, giving people the freedom to take control of their own pension.

  • 300,000 individuals a year with defined contribution pension savings will be able to access them as they wish when they turn 55 – subject to their marginal rate of tax.
  • Announced in the Budget in 2014, these changes were driven by the Liberal Democrat pensions Minister Steve Webb, who has overseen a liberal revolution in the British pensions system.

The big change in the new private pension freedoms will mean people no longer have to buy an annuity from their pension pot. This provides a safety net with regular payments, however, in recent years annuities have been poor, and pensions were very inflexible in access for example in helping children get on the property ladder or even just paying off individual debts.

Previous pension changes under Steve Webb have included:

  • The ‘triple lock guarantee’ for state pensions, a Lib Dem policy, so they will rise by the higher of earnings growth, price inflation or 2.5%. The full basic state pension is now £950 per year higher than in 2010 in cash terms.
  • Guarantee 9m people a workplace pension, which their employers and the government pay in to, giving everyone the confidence to save.
  • A new simple, single state pension to help people save for a better retirement.
  • Abolished the default retirement age-making it illegal for people to be sacked simply because they became a pensioner.
  • Authored the freedoms announced at the budget to allow people with annuities the freedom to sell on their existing annuity.

The pensions revolution has been truly significant for this and future generations. We’ve restored the link to earnings which Thatcher broke, and Labour never changed in 13 years of Government. State pensions will be simpler going forward and not penalising those who have given up work to look after their children. More people will now have a private pension as a result of the changes we’ve made to “auto enrolment” into workplace pensions.

These are changes which have long been overdue and I’m glad that the Liberal Democrats have had the chance in the past 5 years to implement them.

Why do people, and by definition me, get involved in politics

This week for the ordinary person they’re probably thinking about half term entertainment or what to give up for lent. For the politicos out there, general election fever is slowly coming to the boil, but what makes thousands of activists give up their free time, and those like me, stand for election?

I’ve had to think about it, because it’s something that crosses my mind whenever I ask a volunteer to help with a campaign, a voter asks why they should vote Liberal Democrat, or friends ask me why I am standing for an election. It’s because of the type of society I would like to see in the UK, and the world, and who I think is best to deliver, or campaign for this.

For me, it’s a world where each individual has the opportunity to make the most of how they live their life, a society strong in civil liberties and evidence based policies.

And when I look at the policies the Liberal Democrats, and by definition the coalition Government, have delivered over the past 5 years it makes me realise that there has been a liberal theme. A theme, which resonants with me, and those who give up their time for the party.

On life opportunities helping pupils from the poorest backgrounds so their future is not dependent on their birth; giving an income tax cut for millions of ordinary working people; shared parental leave so families can decide how best to care for their children; ensuring the state pensions are delivering a dignified retirement.

Scrapping ID cards for civil liberty reasons; blocking the Tories “Snoopers Charter” and delivering on same sex marriage. Evidence based policies such as introducing free school meals, as trials showed they improved educational results for all pupils. It’s why the Liberal Democrats want to tackle drug and criminal reform as the current processes aren’t working.

It’s one thing to say what the Lib Dems have done (good and bad), it’s then another to show what a liberal Britain can look like. I will cover more of that in another post, but I truly believe that a strong liberal voice, whether in Government or opposition is essential for the UK, and I will be campaigning over the coming months (and years!) to make that voice heard.

Coalition – tackling long term issues not playing short term politics.

Lords reform, an issue all the parties believe in and the public believe in, but which the proposed solution, by Nick Clegg, is viewed as not the right type of reform, not allowing enough time for scrutiny or just at the wrong time. I’m being generous to those who are purely playing party politics with this issue!

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Lords reform is a big deal and Liberal Democrats want to see it delivered, not because we benefit, but because it’s the right thing to do. However, if we can’t get support for it, we should not enter into tit for tat politics with the Conservatives.  There are other things we need to get done, so lets do them rather than get bogged down on an issue seen as honourable but not a wider priority.

I want to see the drive to renewable energy, properly supported. As reported in the Guardian, the Treasury and Conservative backbenchers are blocking proposals, despite the promise of this Government being the “greenest government ever”. Increased certainty is needed for companies to invest in green technology, certainty we are not providing.

We can work together with the Conservatives, we have delivered:

  • Increase the income tax threshold to £8,105, taking 2m out of paying tax, and a tax cut of £546 to 21m taxpayers
  • Pupil premium for the poorest primary school children, worth £600 each
  • Driving the agenda for banking reform
  • Green Investment bank with £3bn of initial funding
  • Pension rises of 2.5% guaranteed or the rate of inflation, average wage increases if these are higher
  • Simplifying future pensions, so everyone gets £140 a week, no means testing

Coalition requires compromises, but as Andrew Rawnsley said in the Observer “by and large, it is the Lib Dems who have been the grownups of the coalition and the Tories who have been the juveniles”.Ultimately the Conservatives are behaving and wanting to enact policies of the party of old. In reality they could use the coalition to show that they have modernised, in actions not just words.

Clegg has been prudent in putting some policies on hold

My view is that a lot of what the Lib Dems were looking to do; free personal care for elderly, free childcare, extended shared maternity leave, citizens pensions is not feasible when you are also talking about making cuts in government expenditure not just rebalancing the books. We are already proposing cuts to trident replacement, abolish Child Trust Fund, restricting public sector pay increase for two years to £400 and cancelling ID cards.

You have to be realistic and reasonable. Companies and families adjust to the economic situation and so must political parties. We still firmly believe in free personal care for the elderly and no tuition fees for students, we did introduce these measures in Scotland when we were in coalition government.

We can still say what we stand for and advocate their introduction when the time is right, which is better than being populist and jumping on the nearest bandwagon that rolls by.

The Lib Dems are still proposing pretty serious changes, which would make the UK a fairer country:

  • A fairer tax system – lifting income tax threshold to £10k, effectively a £700 tax cut and taking c.4 million low paid and pensioners out of tax. Paid for by taxes on the wealthy and with green taxes (to change consumption behaviour).
  • A fair start for children – maximum primary school class sizes of 15 for children up to age 8. Most children from impoverished backgrounds will automatically be behind by the time they are 7 so we need to give them as good a start as possible.
  • A fairer economy, investment in green technology and industries, it is a growth industry and we’ll become less dependent on the financial sector.
  • A fairer form of government, more power to local authorities and  electoral reform to enable proper choice for voters people and make sure their votes count.