Have the reforms to the State Pension gone far enough, fast enough? Just how fair are they – and have older pensioners in particular lost out? Tony Watts OBE asks Pensions Minister Steve Webb to put the record straight.

Steve Webb regularly wins plaudits from all sides for his grasp of the complexities of the pensions system… but not everyone is equally delighted with what he has achieved with the latest State Pension reforms.

There are still complaints that the projected level of the single tier state pension will be below the official poverty level. That today’s pensioners seem to have been cut out altogether. And that the State Pension age for women is rising so quickly.

Other campaigners complain about the way those with modest pensions seem to lose out on benefits, and that those who contracted out in the past are being penalised.

So are the new reforms fair to all? Will they give current and future pensioners a decent quality of life? Or have the changes simply been as much as could be realistically hoped for in the current climate?

First, current pensioners have been left out of the reforms – surely that cannot be fair?

“It’s easy to see why people might think that,” says Steve Webb, “especially if you’re 70 odd and drawing a pension of £105 or £112 or whatever. The bit of the jigsaw that people miss is that – even if I had fallen under a bus on Day One – many newly retired pensioners in 2016 were going to get pensions of £150 a week anyway because of the maturing of SERPS.

“So we haven’t introduced a big step up or an unfairness. There is no extra money. What we are doing is crystallising what was already there. The only thing I have changed about the pension entitlement of any current pensioner is the triple lock.”

Anther bone of contention is the State Pension age receding – it might seem for some people – further into the distance. “Of course I’m still blamed for their pension age going up – but most of this was brought in back in 1995.

“Making it 66 was brought forward pretty aggressively, I recognise that, but what we’ve said is: ‘Beyond that, 10 years’ notice, proper process, independent commission, and a sense of where it’s going in terms of how much of their life someone spends working’. Some Scandinavian countries are taking a year for a year… and that’s pretty brutal.”

Another complaint is that those who contracted out in the past seem to be losing out. How does the Government answer that charge?

“Well you’re not losing out. In a perfect world, we’d have said: “Year zero, 2016, we’re just to pay everyone the flat figure. And for those that had paid in all their lives, that wouldn’t have been fair. In fact, the contracted out generally won’t get the full rate from the State initially, but their schemes will mean they get better outcomes than they would have done under the current system in many cases.”

And will people act responsibly – or might some go out and blow their pension pot?

“There are incentives to act sensibly – the tax system being the obvious one. Draw it all in one go and potentially you are in the higher rate of tax band. Spread it out thinly and may pay no tax at all. The other reason we expect people to be careful is personality. Frugal savers don’t turn into spendthrifts overnight.

But will those with modest savings still lose out, as they seem to at the moment?

Insists Webb: “That’s a central part of what the single tier is trying to achieve. Because, say, you own your own home, because the single tier is above the guarantee credit, if you get another pound of private pension, you may lose 20p in council tax but you do keep 80p. If you are renting in retirement, and paying council tax and on a low income, then you will still see a significant clawback… but less than you would have done.”

So how sustainable is all this longer term?

According to Steve Webb, “The costs of the State national pension will still rocket – but at a slower rate. Complementing that, more people over time will be putting more of their own money in up front through auto-enrolment. And if we can get that to a reasonable level, then hopefully people will have a decent floor funded by tomorrow’s taxpayers and a pot of their own.

“Clearly, the pension age is the valve that we’re using. We’ve already talked about a pension age of 69, and who knows what future longevity will bring. So I think we’ve set a modest pension level – but a sustainable one.

So – finally – if you had foreseen where you are now four years ago, would you have taken this? Steve Webb’s answer is immediate: “I’d have killed, frankly.”