Dilemmas over pension reform

IT will become even more problematic for the Government to persuade people to save for their retirement when it keeps changing the rules of engagement.

Labour made this mistake with Gordon Brown’s disastrous tax raid on private pensions – and now the coalition threatens to do likewise by raising the state pension age earlier than expected.

Of course, it should be acknowledged that David Cameron’s Government has far less room for financial manoeuvre than when New Labour came to power – and this is compounded by greater awareness about the cost of an ageing society.

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It should also be noted that the coalition’s changes will affect 33,000 women, according to Labour leader Ed Miliband, and that Ministers need to balance this group with the interests of the wider population.

Difficult decisions will, inevitably, mean winners and losers as Ministers look to bring the deficit under control – and any hint of compromise will be politically embarrassing following a series of U-turns.

That said, this should not preclude Ministers (the beneficiaries of a very generous Parliamentary pension) from considering the consequences for all those whose retirement plans will be altered as a result of their haste.

This is not an issue where a charge of bandwagon-jumping can be levelled against Mr Miliband. Quite the contrary. The shadow pensions minister and Leeds MP Rachel Reeves has been highlighting this issue for months and has successfully established a cross-party consensus.

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She would achieve this by equalising the state pension age for men and women by 2020, giving the individuals concerned sufficient time to plan ahead, and then increasing the age of retirement to 66 over the next two years.

If it was right for the Government to “pause” its NHS changes, then the same should apply to the pension plan before it faces a potentially costly legal challenge.

The downside is that such a delay will reinforce Mr Cameron’s reputation for caving in to opposition – precisely the message that he does not want to send out ahead of next week’s public sector strike.