Webb’s pension contribution proves simply baffling

While the pensions minister thought he was making everything clear, almost everyone around him reeled in bewilderment

Pension reform, and Steve Webb the minister to introduce it! That’s a gripping combo if ever I heard one. No wonder 63 MPs, nearly 10% of the total, turned out to hear Mr Webb describe his plans for the future of this vital topic.

The minister was the ideal choice, since he may be the only person on earth who comprehends the present pension regulations. Palmerston famously said of the Schleswig-Holstein question (it used to be part of Denmark) that only three people understood it; one was mad and another was dead. Some MPs suspect that Mr Webb may be both.

Anyhow, he tried to make the whole grisly thing sound like fun. Possibly, to him, it is fun. It used to be said, he announced perkily, that whereas a man needed a pension, a woman needed a husband. No longer. What was going to happen now was that women would get equal treatment, and the whole thing would be simple, simple, simple. A flat rate pension!

So goodbye to the kind of convoluted language people had been expected to cope with. He gave us an example from the present rules: “At some time you chose to contract out of the additional state pension by paying into an occupational or personal pension. Because of this we make a ‘contracted out deduction’ – a COD – from the maximum amount of the additional state pension we would otherwise pay you. We make changes every year to the additional state pension and the COD but this may be at different rates. This means your additional state pension could be different from the amount we have estimated, and could actually be zero.”

In other words, the piece of COD that passeth all understanding.

Mr Webb kept saying how simple it was all going to be. But every word he uttered made it sound more hideously complicated than ever.

“Of course, national insurance contributions paid, and which will, under the current system, have led to entitlement for the second state pension, will be recognised … those workers who had previously contracted out will start to pay full national insurance contributions like all other workers, but in return they will be entitled eventually to pensions at the single tier level!” he said, a note of triumph in his voice. How simple can you get?

Mr Webb looked extremely pleased with himself for expressing everything so lucidly, while the rest of us were wondering whether it was time to trade in our brains for an upgrade.

It went on. Some folk would “accrue SDP’s” Some payments had been “CPI’ed”. “That is an enormous cliff edge,” he said of something, possibly an enormous cliff. “There have been virtually no transition arrangements for the enormous cliff edge, so someone retiring the day before the enormous cliff edge got nothing, someone who retired the day after got the benefit of 30 years! So there are precedents for this kind of thing!”

What was rather sweet was that he clearly thought he was making everything limpidly clear while almost everyone around him reeled in utter bewilderment.

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