Simplification of state pension and the abolition of contracting out, completing the indexation switch from RPI to CPI, public sector pensions reform and a successful launch of Nest are the four areas that government will focus on, says Johnson, who ran David Cameron’s Economic Competitiveness Policy Group before the election and who has advised the Treasury on pension tax policy.
Speaking at the Friends Life Global Forum this week Johnson said simplification of the state pension is the top priority, with some in government considering the policy, which could be perceived as a near 50 per cent increase in pension, as so attractive that it should have been saved until nearer the next election date.
But he said a key benefit of the change would be the abolition of contracting out, with most of the £9.1bn of contracted-out rebates going to public sector employers.
Johnson said: “Simplification of state pension is the top priority. People together even though that the government may have peaked too early by releasing it now. Telling people that they are going to almost double their pension could have been a vote winner – there are those in government who would have rather the policy hadn’t come out until later in the political cycle.
“The switch from DB to CARE will face opposition, but this does not really matter. What matters is getting rid of contracting out. Is this a ruse or a conspiracy? Call it what you will, but a consequence of ending contracting out will be a massive influence on public sector pension costs.”
Johnson also said he did not believe it was a certainty that the switch from RPI to CPI would be successful.
“You might say it is a slam dunk, but I am not too sure. Teachers are pressing on it and it does seem unclear legally. The teachers’ union would not be spending large amounts of money on lawyers unless they thought they had a chance of winning.”
He also criticised the £29bn of upfront tax relief that is given through the pensions system as inefficient if its aim is to stimulate saving. He said that while it was not certain that the government would target higher rate taxpayers again so soon after the recent changes to the lifetime and annual limits, the chances of it doing so would raise if the UK fell into a Japan in the 1990s style economic malaise.
