Sir Steve Webb answers your pension questions

Sir Steve Webb, former pensions minister and currently director of policy at Royal London, visited the CISI offices to participate in a special live webcast where he answered members’ pension questions
by Jane Playdon

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CISI members can view the full Q&A on CISI TV: 'Ask Steve Webb a pension question'Jacqueline Lockie CFPTM Chartered FCSI, CISI deputy head of financial planning, questioned former pensions minister Sir Steve Webb recently on several aspects of pensions, and relayed CISI members’ questions to him via a live webcast.

They discuss the increasing complexity of pensions regulation; the importance of saving; the triple lock; COBS 19; the advice gap; means testing; universal basic pension and more, but the main point emphasised throughout is the necessity to save more towards pensions.

Steve says that pensions auto enrolment has been a “huge triumph, with seven million enrolled to date … but they are putting very little in”. He recommends a system of automatic escalation, whereby contributions increase gradually towards higher percentages of income as pay goes up. Logistically, this increase could happen through “some sort of even split” between employer and employee. “That one change would probably be the biggest single thing” to make a difference to a pension pot, he says.

Running ad campaigns and tweaking tax relief to encourage young people, for whom retirement seems far away, to save more towards a pension “doesn’t work”, he says. “People don’t notice” tax relief because it’s done through the pay packet. He says it is far more effective to get the defaults right and focus on nudges – such as auto enrolment – instead of incentives.

What advice would you give to young people who try to get out of debt and save for their first home?

Because they’re getting employer contributions [towards pensions] as well, I would be loath to say to a young person to focus on clearing debts; focus on buying a house; get out of your workplace pension. Use other means, like the ISA allowance, once you’ve taken advantage of the employer pension. Auto enrolment has put two million under 40s into pensions. These are least likely to opt out. Twenty-somethings are staying in. Inertia is a wonderful thing. People have a habit of budgeting with what’s left.

Essentially we have a graduate tax in Britain. Many graduates will have large student debt, so they’re repaying an extra 9% in tax above 21,000 per year, but there’s no rush to clear that. If you have a fantastic career, you’ll pay it back. If you have trouble and you’re out of work, you’ll never pay it back. Focus on auto enrolment, then by all means, start to save for a house deposit.

Some sources say the pensions triple lock betrays the younger generation. Thoughts?

The younger generation will be old one day and they need a decent state pension. Making state pensions affordable isn’t just about the triple lock; it’s about the pension age, which is going up and that will significantly help affordability. Personally I would prefer a good state pension at a realistic age to a lousy state pension. Most of today’s workers will have poorer private pensions, so they will need the state pension more. We must be careful we don’t back off from the state pension so much that today’s workers have to work forever to get it. Crucially for the young, we need to get them enrolled, get them paying into a pension, get employer contributions, get tax relief in.

On financial education

Financial education is going to be challenging. Instead of making everyone an expert in everything, focus on key life events, such as having a financial MOT when you turn 50. Review finances and plan rather than letting events just happen. What we need to do is get to people much earlier.

On closing the advice gap

The challenge is getting people through the door. I’m interested in the idea of subsidised advice vouchers. The government could potentially pilot a scheme whereby they provide vouchers that are only of value if they are spent on independent financial advice

Financial Planning Conference 2017
Sir Steve Webb will be leading a panel discussion on the future of the UK financial services industry at the CISI Financial Planning Conference 2017, which will take place on 27–27 September at the Celtic Manor Resort Hotel, Newport, Wales.

This is a 'must attend' event for many CISI financial planning members and Accredited Financial Planning FirmsTM. It provides opportunities for personal and business development, quality structured CPD, the sharing of best practice, catching up with friends and making new connections.

To view the full programme and speaker line-up, visit where you can book your place, along with any specific sessions that you would like to attend.

Book before 30 June 2017 to receive 5% off the full conference price (automatically applied during booking).
We look forward to welcoming old and new members to the conference.
Published: 20 Jun 2017
  • Financial Planning
  • Steve Webb
  • Pensions

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