David Gauke's speech to the Westminster and City annuities and drawdown conference
The Financial Secretary to the Treasury gives an overview of the government's pension reforms.
Good morning 바카라 사이트� and thank you, for that introduction.
I바카라 사이트檓 delighted to have been invited to speak at this conference.
Pensions is a topic that바카라 사이트檚 incredibly important to people.
As we live in a society where, every year, life expectancy creeps upwards, it is only right that pensions keep up with those changes. So having the right regime for pensions will only get more important in the future.
We are a government that believes in personal responsibility.
I think if you work hard, if you바카라 사이트檝e saved all your life, then it바카라 사이트檚 right that you have responsibility to manage the money you바카라 사이트檝e earned as you best see fit.
Again, I think it바카라 사이트檚 right that people should have far greater choices regarding how they use their pension pots. Because practically every day on the news we see stories which prove that there is no such thing as a typical retirement.
You have 바카라 사이트減ensioners바카라 사이트� driving 550,000 miles round the world in a 1988 Mercedes.
You have 바카라 사이트減ensioners바카라 사이트� working well into their nineties 바카라 사이트� like some of my colleagues over in the House of Lords.
And just last week we had the story of the woman in Saratoga, over in the States, who celebrated her 100th birthday by going skydiving.
So people want choice, they want freedom, they want flexibility, but 바카라 사이트� we shouldn바카라 사이트檛 forget this 바카라 사이트� they also need security. Not least because as people live longer, the prevalence of age-related illnesses is also rising. An ageing population brings with it challenges, too.
So the question we ask ourselves is: how can government and business work together to create the right pensions for the 21st century?
I see my role as a politician as creating the right conditions for that and allowing you, the market, to be able to respond accordingly.
During this Parliament, we바카라 사이트檝e set out a comprehensive package of reforms to help people in their retirement.
And I바카라 사이트檇 like to spend a short time today talking about those reforms, because they are highly relevant to the topic I was invited to discuss 바카라 사이트� the flexibility reforms announced by the Chancellor at the Budget earlier this year.
I바카라 사이트檇 also like to talk about how I see the differing roles for government and industry in getting these reforms right for pension savers, and how we can work together to ensure people have the right options open to them when they retire.
Our starting point has been a very simple one: creating security in retirement.
When the state pension was introduced in 1908, only one in four people could expect to live long enough to 바카라 사이트渆njoy바카라 사이트� it.
Today, by contrast, the average length of retirement is almost a quarter of a century. And retirement is more active than it바카라 사이트檚 ever been. As my colleague Andrea Leadsom likes to say, everyone has their own retirement journey.
So over the past five years, we바카라 사이트檝e significantly improved the state support on offer to pensioners.
From April 2016, the new state pension will give people certainty about what they can expect from the state during their retirement, reducing the likelihood they will require means-tested benefits.
The triple lock, introduced at the beginning of Parliament, ensures that increases to the basic state pension will not be outstripped by earnings, growth or inflation.
This means that pensioners are now 拢440 per year better off than they would have been had the state pension only been increased by average earnings since 2011.
We바카라 사이트檝e also carried out a great deal of work to boost the culture of people saving privately for their retirement.
Automatic enrolment, introduced just over two years ago, gives all employers a duty to enrol their employees into a pension scheme.
As a direct result of this, four million more people are now saving into a pension.
By the time the programme is fully rolled out in 2016, up to 9 million people will be newly saving for their retirement.
This radical reform will increase the amount being saved in workplace pensions by around 拢11 billion per year.
Automatic enrolment will ensure that individuals have the opportunity to save into a pension and are supported to do so.
But we also need to make sure that when they come to access those savings, they get a fair deal 바카라 사이트� that they can use those savings in the most appropriate way for their personal circumstances.
And that brings me neatly onto the rationale for the government바카라 사이트檚 radical flexibility reforms: giving people real freedom and choice in how they use their pensions.
That means making changes to legislation.
It means allowing industry the freedom to create products which are right for them.
And it of course also means ensuring the provision of free and impartial guidance.
One of the biggest financial decisions people will ever make is how to secure an income for themselves in retirement. But since the early 1920s, the tax rules have severely constrained that choice for most people.
We have always maintained it is unfair that people should be encouraged to save but not allowed a choice about what to do with those savings.
It is inappropriate and counter-productive for the state to attempt to force a 바카라 사이트榦ne size fits all바카라 사이트� solution on people.
So we have taken significant steps to introduce greater flexibility and choice in pensions.
In 2011, we removed the requirement to annuitise by age 75 and introduced flexible drawdown, allowing people who could demonstrate a secure retirement income of over 拢20,000 to access the rest of their savings as they wished.
And, as announced at Budget earlier this year, we are now going further.
From April 2015, the tax rules will allow everyone with a defined contribution pension to access their savings as they like during their retirement.
We are putting these reforms in place because we believe they are the right thing to do 바카라 사이트� that it is fair that people can make their own decisions about their own money. And we also hope that they will initiate a culture change.
For years, we 바카라 사이트� and by 바카라 사이트渨e바카라 사이트�, I mean both policymakers and industry 바카라 사이트� have been scratching our heads over people바카라 사이트檚 lack of engagement with retirement.
Well 바카라 사이트� what was there to engage with? Like a Soviet restaurant, just a narrow range of very similar choices.
So we have geared these reforms, alongside the guidance guarantee allowing people access to impartial guidance, to re-engage people with their pensions and transform the culture of savings.
In fact, the National Association of Pension Funds found in their spring workplace survey that 28% of workers were more likely to save into a pension following our Budget announcements, with young people and those on lower incomes the most likely to do so.
This is really encouraging news. It lends support to the idea that interest in pension savings has been undermined by a lack of choice.
Our reforms are addressing that.
The support for the principle of these reforms has been considerable.
And if, as we hope, these reforms increase people바카라 사이트檚 attraction to saving and their engagement with the options available, they will present a serious opportunity for both government and industry to transform the culture of pension savings.
Of course, none of this is simple. It is not possible to reverse years of disengagement overnight.
To build confidence in the system, we must work together to create an environment in which people are able to make the decisions that are right for them.
And I want to talk a little now about how government and industry can work together to meet that goal.
I바카라 사이트檓 quite clear that a key part of the government바카라 사이트檚 role is to maintain the conversation with experts from the industry.
Our reforms will deliver a framework to allow savers the opportunity to make their own decisions 바카라 사이트� but the pensions and insurance industries are the vital link between the government and savers.
Without that link, people will not be able to achieve the retirement outcomes they want with the money they바카라 사이트檝e saved over their working lives. So we have listened to you.
We consulted extensively on the implementation of the flexibility reforms. The 12-week consultation Freedom and Choice in Pensions received hundreds of responses. Our officials worked closely with a number of industry experts to develop the right solutions to the questions posed in the consultation.
We responded to the consultation in late July 바카라 사이트� and shortly afterwards in August, HMRC published the draft tax legislation, which set out the proposed new tax framework, for technical consultation.
We바카라 사이트檙e making good progress in delivering these legislative changes.
The Taxation of Pensions Bill is currently at Committee Stage in the House of Commons.
And the Pension Schemes Bill, which delivers the regulatory changes needed to give effect to the reforms, including the guidance guarantee, has just completed Committee stage.
The tax Bill includes a number of changes designed to free up innovation in the retirement income market 바카라 사이트� including allowing annuities to decrease, and removing the ten year upper limit on guarantee periods for annuities.
These changes, among others, were the result of extensive consultation with industry. The aim is that in the longer term, they will result in new products tailored to customers바카라 사이트� changing needs in retirement.
In addition to the progress the government is making with legislation, I know 바카라 사이트� and welcome 바카라 사이트� that there is an incredible amount of work going on across the industry to get ready for next April.
I am relaxed about the fact that there is much that the industry can do which we cannot 바카라 사이트� and a lot that you know which, frankly, we don바카라 사이트檛.
So please continue the dialogue with us. Having industry insights available to us is what makes it possible for government to make reforms on this scale in the confidence that they will be a success.
The industry knows its customers best. That allows you to play an important role in designing the detail of a system that really works.
Your customers will be relying on that system to deliver choice and flexibility.
While we, in consultation with industry, have designed the overall tax framework, we are aware that there is a lot more that sits beneath that, in terms of systems, in terms of products, in terms of how the new flexibilities actually work from the perspective of the people using them.
So we have designed these changes to allow you much more freedom to create new products and processes that fit with the demands of customers and the changing nature of retirement.
I see the industry바카라 사이트檚 main role as taking the new flexible framework and using it to create a new system which delivers what consumers want.
Some of this will be about new products.
Some will be about the adaptation of existing products.
And some will be about the way in which industry talks to its customers.
And all of it should be about increasing choice and engagement in one of the most important financial decisions a person will ever make.
It was the Finance Act of 1921 which put in place the basis of the current restrictive policy towards the use of tax-relieved pension savings, by introducing 바카라 사이트渢he mandatory annuitisation of pension funds바카라 사이트�.
I would like to think that things have changed sufficiently since 1921 바카라 사이트� in terms of life expectancy, the labour market, and private pension provision in the UK 바카라 사이트� to merit a change in the way we treat the savings of people who, during their working lives, have put money aside for their retirement.
I am excited 바카라 사이트� not just about the new options opening up to people as they reach retirement age, but about the opportunity this creates for your businesses: to add a new kind of competition to the market that is shaped by peoples바카라 사이트� needs and desires.
I hope you will rise to that challenge, keep developing the new system with the changing needs of your customers in mind, and meet their aspirations for what are, for many, their best years.
Many thanks for your time 바카라 사이트� and I바카라 사이트檓 very happy to answer questions.