Jeff Salway: Retirement planning

In it, the Work and Pensions Committee called on the government to do more to raise awareness of state pension reform, not least the flat-rate  pension. The committee rightly noted that the complexity of the changes has left many people with little idea as to how they will be affected, not least those who will lose due to the end of contracting out.

The report also calls for retirement planning to be included in financial education lessons in schools. This is where its credibility is undermined somewhat.

To believe you can engage schoolchildren in the need to save for a retirement that won’t begin until their 70s is naive in the extreme. I’m a big believer in the need for personal finance education on the curriculum. But why would teenagers want or need to know about planning for their pension years when they’re not even in the workforce yet?

It’s the fundamentals they need to understand when they leave school – working out the cost of borrowing, managing day-to-day finances and the benefits of compound saving, for instance. Instil them and you already have a solid foundation for successful retirement planning.

Don’t forget too that politicians tinker with the pension system to the point of obsession. It may well have changed beyond recognition by the time today’s school children approach retirement. The chances are that in 50 years retirement will be a luxury enjoyed only by a lucky minority.

That the government has done far too little to explain its state pension reforms – potentially putting millions of people at a disadvantage in the process – is not in doubt, however. The pension changes being pushed through by this government may be among its few positive legacies – perhaps its only one –but it’s in grave danger of undermining them.

End the myths over welfare

The debate over the welfare reforms taking effect this week has raged in every newspaper in the country. This one is no exception, with a typically thought- provoking contribution on Thursday from Alex Massie.

Like many commentators, he alluded to research suggesting most people are in favour of cuts to benefits and said there’s a need to tackle a welfare bill that continues to rise.

These are arguments that I would question, however. The sheer size of the welfare bill is clearly a problem, one raised time and again in the case for benefit cuts.

What supporters of welfare reform usually omit to mention is that the welfare bill is rising because of the burgeoning cost of pensions, which account for almost half of the welfare budget. The next biggest chunk goes on support for low-paid workers, mainly in the form of tax credits.

Reform cheerleaders are also unable to explain why the disabled are bearing the brunt of the cuts. It’s an inconvenient truth that most choose to swerve altogether.

The government wants to slash spending on disability benefits by a fifth, yet its own figures show just 0.3 per cent of incapacity benefit fraud and 0.5 per cent disability living allowance (DLA) is claimed fraudulently.

From this month the DLA will be replaced by the personal independence payment (Pip). Work assessments determining eligibility for the Pip have deemed people with terminal illnesses to be fit for work.

Some of those have died shortly after, while the stress of the tests have driven many people to suicide.

But all this is necessary, we’re told, because the welfare bill is too big and we need to “make work pay”.

YouGov research published in January found that 47 per cent of people believe the government is “not being tough enough” on benefits.

A similar proportion agree with the 1 per cent benefit cap, while 51 per cent think it’s “unfair” for benefits to rise “when many people in work are seeing their wages rise by less than inflation”.

It’s not surprising that so many people support benefit cuts, because of the myths perpetuated about welfare. Attitudes change when the full facts are presented.

YouGov research also shows that 64 per cent of respondents wrongly believed that the cap will mostly affect the unemployed. In fact 60 per cent of those it hits are working households – and respondents’ support for the cap plunges to 30 per cent when they are aware of that.

The average respondent reckoned that 41 per cent of welfare spending was on benefits for the unemployed. The government’s own figures put that much lower, at 3 per cent. People also believe 27 per cent of benefits are claimed fraudulently. In reality, according to government data, it’s 0.7 per cent.

The divide over welfare reform is deepening, to the government’s delight, and the arguments will run and run. But if the attack on benefits claimants really was fair it wouldn’t need to rely so heavily on myth-making and the demonisation of those on the receiving end.

Jeff Salway: Retirement planning | Welfare myths