Jeff Salway: Pension campaign too little too late

So it’s unfortunate, really, that they’re now the public face of the reforms that will shape the future of the UK’s retirement provision.

They feature alongside so-called celebrities I’ve never heard of in adverts promoting reforms starting on 1 October that will see up to ten million people automatically signed up for work-based pensions.

No longer is it enough to provide company pensions and hope that people take advantage, regardless of how much the employer promises to pay in. Under automatic enrolment, if you’re signed up it’s up to you to opt out.

To put the auto-enrolment target into perspective, fewer than three million people are active members of private sector defined contribution schemes, into which most workers now pay, according to new figures from the Office for National Statistics. Much hinges on the consumer apathy that the financial services industry is so adept at exploiting. There’s an assumption that people won’t be bothered to opt out, but I’m not convinced. On being told some of their pay is being diverted into a pension plan for them, distrust of the pensions system is such that many people will have none of it, no matter that their employer will pay in too.

The inept awareness campaign hasn’t helped. Both government and regulators still cling onto the notion that “if you build it, they will come”. They’ll happily spend billions on creating schemes, initiatives and reforms, only to realise eventually that either no one knows about them, or no one cares. The biggest pensions reforms in years come into force in just over a week’s time and only now has the campaign to tell people about it begun in earnest. If auto-enrolment works, it has the potential to reinvigorate the UK savings culture. But the scheme, and the broader concept of long-term savings, must be sold far more effectively.

Vulnerable targets

SLASH benefits more and make it easier to fire people. That’s how to get out of the economic hole we’re in, according to a former defence minister forced to resign in disgrace last year. Liam Fox last week urged chancellor George Osborne to use tax cuts to stimulate economic growth.

How would he fund this? Fox has spied an opportunity – he would use the savings from a new crackdown on benefits. Foxes like their easy targets, preying on the vulnerable. This one’s no different, proving the Tory self-preservation instinct is as strong as ever.

Even after lowering taxes for the richest and slashing benefits for the disabled and others unable to work for health reasons, there remains an appetite for hacking away at the welfare state.

Another idea is to increase benefits in line with average earnings, rather than inflation – which in recent years has increased at a faster rate than pay. The way in which the annual increase in benefits is calculated has already changed in the government’s favour. Since April 2011 they’ve been linked with the consumer prices index measure of inflation, rather than the more generous retail prices index measure.

The earnings link proposal suggests the government is confident that for several years at least, wage inflation will continue being outstripped by the rise in prices. Which makes the proposal even more potentially ruinous for households on the breadline.

If the opportunistic Mr Fox gets his way, however, the worst is yet to come.