Ex-pensions minister Steve Webb has said reaching a state pension age of 66 by 2020 should have been done over a much longer period.
The remarks were made during the Work and Pensions Select Committee inquiry on 2 March which took evidence from Steve Webb and Resolution Foundation executive chairman David Willetts.
The session was held by the committee as part of its inquiry into intergenerational fairness looking at how inequality between generations should be addressed over the long term.
Webb, now director of policy at Royal London, hinted that the coalition government had been making up for the mistakes of previous governments by addressing the pension age.
“We [the British government] did nothing for 70 years and then suddenly had decades’ worth of catching up to do.
“I do not think we were wrong to get to a pension age of 66 in 2020 – we just should have done it over a much longer period and started a lot earlier. That would, in my view, have been a fairer adjustment process.”
Webb also said he hoped the committee would not take the state pension triple-lock in isolation during their inquiry, stressing that it was part of a package made up of rising state pension ages, abolishing earnings-related state pension ages. Webb oversaw the state pension triple-lock as pension minister.
Lord Willetts, who has written extensively on the intergenerational fairness issue, said he was baffled by the idea that a pensions ISA, which the government had been considering as part of its tax relief review, was good news for young people. He added that a flat rate of tax relief would benefit this young group since they were not generally higher-rate taxpayers.
However, Chancellor George Osborne has reportedly abandoned plans to reform pension tax relief in next week’s Budget after facing backlash from the industry and pensions minister Ros Altmann.
“If the rate of tax relief was 33% for example it was then young people would be getting more of a start,” Willetts said. “We have been saying young people do not have much cash because they are paying rent and all the rest of it.
“I think a good flat rate that does not take bucket loads out of the system, which I would be opposed to, could be good news for younger people.”
“You can see what the reward is for saving. You can access some of your own personal savings, with the government’s matched contribution held in a separate account, and then if you put your money back, the contribution stays. But if you never put your money back, at some point you lose the match, so that gives you an incentive to put money in.”
Willetts pointed out that another consideration was a flexible pension where savers could take out their money in an emergency or certain circumstances, returning the money later or risk losing the match.
Webb agreed with this, adding there was a growing argument for earlier access to pension funds if the process was properly controlled.
“For young people and for the self-employed the evidence is the self-employed want a pension they can dip into for their business,” he said.
“Young people might want a pension that they can dip into for a deposit. I think this is an argument whose time has come.”
The committee also discussed the inheritance boom with people leaving substantial assets upon their death, which Webb said was critical to the intergenerational fairness inquiry.
“Looking at who has the equity now does not necessarily give you the right answer,” he said. “If you thought older people are just going to gorge on their housing equity, then you have a real problem. You have an issue anyway, but inheritance clearly matters.”
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