27 June 2008

Rt Hon James Purnell MP

Secretary of State for Work and Pensions

TUC Member Trustee Network Conference

Congress House, London

Friday, 27th June 2008

[Check against delivery]

 

I sometimes get a bit nervous talking about Pensions. It’s not as if I’ve not had enough practice – but when a politician brings up retirement, people sometimes get ideas.

I’m delighted to be here today. I can only apologise that my other commitments today mean that I cannot be here for longer to field some of your questions- but I’m sure our chief Pensions Economist Robert Lazlett will be able to more than make up for it.

I’m glad that you were able to find the time for me to speak- I was particularly keen to take the opportunity to celebrate the work that you do.

Trustees are, of course, integral to the successful running or our pensions.

You are vital to UK pensions- you provide protection for the interests of your schemes’ members. And by extension you are the guardians of public confidence in pensions. Confidence that is fundamental to our shared aim to provide a secure retirement for all.

Your knowledge and impartiality, your honesty and hard work may often go unheralded, but they are nonetheless vital for that.

I also want to pay tribute to the work of the Trustee Network. The demands on trustees are technical and often challenging. With the legal requirement for you to have the right knowledge and understanding to carry out your role effectively, the support of the Network is key to giving you the tools you need.

And I commend the TUC for its leading role in providing this guidance, work that is admirably complemented by The Pensions Regulator’s code of practice, and its online ‘Trustee toolkit’.

I want to speak on the issue of our commitment to 50% member nominated trustees. We stand by the commitment. However given the ever greater demands on trustees we need to ensure that they have the greater understanding, expertise and technical competence necessary to fulfil their role.

Therefore I want to commission some formal research into these issues, so that we can see what impacts would be of getting more MNTs. We will continue to move towards delivering on the commitment, but need to do so in way that is safe, in line with concerns expressed by the Pensions Regulator.

Today I want to speak more about confidence-Its not just about trustees, its also about the system.

We have begun to turn the corner, putting in place a framework that is stable to enable people to have confidence in the pensions system.

Confidence is key because we recognise that saving for the future is a long term investment. We have to do everything that we can to ensure people trust the system, to allow them to take the right decision.

The early 80’s and 90’s were not good for public confidence- the Maxwell affair, employers pension holidays, the collapse of schemes and the corrosive effects of miss-selling. These undermined the very idea of saving.

That’s why we created the Pension Protection Fund. To ensure 90% of the benefits of Final Salary schemes are safeguarded if something went wrong. The PPF currently protects nearly 11 million members. And by guaranteeing retirement incomes, it generates confidence.

But it is not enough just to react. We must pre-empt problems before they arise, which is why the Pensions Regulator was created- to provide greater protection for members and to reduce risks to the PPF.

Having given greater security to those saving for a pension today, we also worked to bring justice to those who through no fault of their own lost their pension prior to 2004. 

And last December, we announced a final and just settlement for 140,000 people, many of them already over pension age, who had cruelly lost their pensions.

Last weekend we began paying out the first FAS benefits at 90% of core pension. Good news for those who had lost out and testament to the consensus which facilitated rapid passage through Parliament. 

So we now have the triple lock, PPF for future, FAS for the past and TPR overlooking it all.

The last time I was in this room was to help celebrate the centenary of the introduction of the first British State Pension. An innovation that has made such a difference to people’s lives.

Things have moved on since- We don’t any more subject people to a character test to ensure that they are worthy of their money. We don’t expect a married couple to get by on 38p. But those early innovations nonetheless laid the ground for where we are today.

And of course, we have built on those foundations. The changes in our society mean that Pensions have had to move on too.

Life in the 19th century took was hard. Just a quarter of the first generation potentially eligible for a state pension survived to reach age 70 in 1908. Most didn’t live beyond their early 40s.

In 1909 there were just 0.5 million people drawing old age pension in Britain. Today there are close to 11 million people drawing a State Pension

On current trends, the first person to reach 120 is predicted to be a women currently aged 65! That means that she has already started taking her pension and by the time she reaches her final days, she will have been receiving her pension for half of her life.

This sets up the challenge. How to deal with these changes.

Last year’s Pensions Act provided for simpler, fairer, more generous State Pension system. We have put in place a guaranteed standard of living for all pensioners. And with the commitment to restoring the link to earnings, by 2050 the State pension will be worth more than twice what it would have been otherwise.

And the Bill currently going through Parliament is building further on the improvements to the State Pension. For many, the state pension will form a solid foundation.  But it will not be enough to fulfil their aspirations for retirement. Over 90% of people questioned in a recent poll believed they needed more than just the state pension to live on when they retire.

Today, in the UK many millions of employees, often on low incomes or with broken working patterns do not have access to an occupational pension scheme.

Only 40% of the working age population are making any retirement provision and so we are determined to provide these people with a way to save for a pension.

As the Pension Commission said, this is not a crisis now but we are presented with unavoidable long term challenges that require action… to avoid a future crisis.

And if we fail to act now, we risk creating a generation of impoverished pensioners.

So the Pensions Bill, which is currently in the Lords, will give many millions more the means to take control of their retirement.

It will address savings inertia and lack of provision. It will target the many millions who are not saving enough. And it will transform the pensions market.

Through automatic enrolment, we will combat the uncertainty and resistance that many people still feel about saving.

To ensure that saving for a pension becomes the default position. So that saving for retirement is no longer the preserve of the manager or consultant. So that for everyone, it is normal that as you start to work, you start to save.

And this revolution in pensions will bring big prizes.… up to 9 million people saving more or for the first time … and up to £10 Billion more being saved in pensions

A step change in saving and a transformation of the pensions landscape.

These reforms present great opportunities for individuals, allowing more and more people the chance of the retirement that they deserve.

But they are also key opportunities for you. Those of you who look over these schemes will see your work increase as more and more people take up this pension provision.

I am sure that you will be up to the task, working together as you are here today, to play you role in ensuring that the system is well-managed, trustworthy, and sustainable for the years ahead.

With your help, the system will be in place not only for our retirement, but for our children’s, and for the retirement of generations yet to come.

Thank you for your work, and long may it continue.