Last week, speaking on the future of the state pension, Secretary of State for Work and Pensions, Iain Duncan Smith, said “We have to fundamentally simplify the system. And we have to make it crystal clear to young savers that it pays to save.”
Mr Duncan Smith has already succeeded in putting forward welfare reforms that make sure you are better off working than not working. Now he is preparing the ground for reforms that will ensure that you are better off saving than not.
Proposed State Pension Reforms
The proposed reform to the state pension will mean that those who have saved will receive the same support from the state as those who haven’t. The proposed £140 week basic state pension may not be enough to sustain your desired lifestyle, but this is obviously not the point. Beyond that it is your responsibility to save for a pension and under this scheme you will at last have a fair basis to save from. Your savings will no longer be a substitute for Government benefits that you would otherwise have been entitled to, had you not saved.
Making it pay to save has been Save Our Saver’s message from the start. These proposed changes to the state pension would be a major step forward, but the reforms must not stop there.
Current Economic Policy is Making a Mockery of Savers
Savers, who are role models for Mr Duncan Smith’s future vision of society, are now subsidising borrowers through inflation and low interest rates. Their attempts at prudence and self reliance are being made a mockery of by the Government’s current economic policy.
If Britain is to get back on its feet both socially and economically we must embrace a savings culture. Without saving we, as a nation, are destined to become poorer and poorer. Student loans and overpriced housing make it increasingly difficult for the young to start saving, whilst increasing longevity and the declining ratio of workers to retirees makes it more imperative than ever that they do.
However, saving is an act of faith in the future; if we know that the Government considers it acceptable to transfer the value of those savings to borrowers then there is no incentive to save.
The Morality of the Saver Must Never Be Compromised
In order to build a savings culture the morality of the saver must never be compromised. This means that even in times of economic crisis savers must be able to get a return above inflation on their savings.
Mr Duncan Smith first announced his plans to reform the state pension in October 2010. The green paper expected in December has not yet materialised. There have been reports of tensions and disagreements with the Chancellor – the Treasury no doubt more interested in the short term cost than the long-term economic sense and social justice.
Even though the green paper has not been published there has been much speculation over the adequacy of the pension and the possible winners and losers. Mr Duncan Smith is fighting for a society where self-reliance and personal financial responsibility are rewarded and where long-term planning takes precedence over quick fixes. Whether we agree with the detail or not, the principles underpinning these changes must be upheld. He deserves all the support we can give him.