David Cameron – 2014 Speech on Savings and Pensions

Below is the text of the speech made by David Cameron, the Prime Minister, at a PM Direct event held by Saga in Brighton on 24th March 2014.

Thank you very much. Thank you, thank you. Great – great to be here. No long introduction from me because I really want to spend this time answering your questions. Let me just make 2 points; about the budget and the thinking behind it.

The first is this: you can tell a lot about a society by how much it enables people to live in dignity and security in their old age. Now, I am not claiming that we have solved all the problems of helping pensioners in our country, but this government, while making difficult long term decisions about our economy and our future, has tried to help pensioners live out their lives in dignity and security.

We protected the basic state pension with the triple lock, so it always goes up by earnings, prices, or 2.5%: whichever is the highest. That’s had a real impact over the last few years. We protected those pensioner benefits, a promise that we’ve kept in terms of the Winter Fuel Allowance, the free TV licences, the bus passes and suchlike. That is important.

Then you’ve got these moves in the budget which will help pensioners to use their savings better. And so you’ve got the abolition of the 10p rate on savings income up to £5,000; you’ve got the pensioner bonds. The pensioner bonds are very important because a lot of pensioners say to me, “Look, I’ve worked hard, I’ve put some money aside, but because interest rates are so low I don’t really get any income from my savings.” These pensioner bonds will help pensioners to do that; there’s £10 billion worth of them available, but there’s a limit of how much any one person can take. And so it’s a good way of helping pensioners have that dignity and security.

So that’s the first thing I wanted to say. The second thing I wanted to say is that all of this links to the long term economic plan that we have for our country. We’re involved in a giant turnaround exercise: to take an economy that was truly troubled after the 2008 Great Recession and give it a chance of success in the modern age.

Now this plan, at its heart, is about creating jobs, and we’ve got more people in work. It’s about cutting people’s taxes, and we’ve now lifted to £10,000 the amount of money you can earn before you start paying income tax. It’s about making sure that we build the schools and provide the skills that are going to be essential for future generations. It’s about controlling immigration and controlling welfare, so that people who work hard and do the right thing get rewarded. And it’s about building the infrastructure that this country needs.

So, it’s a plan and you can see every aspect of this plan and we’re going to report in on this plan over and over again. By the end of it I expect you’ll be bored to death of hearing about this plan but the point I want to make about this plan is actually not the facts and figures, but the values behind it. Because in the end, that’s what matters most of all: why are we doing this? Who are we doing it for? And what will the country feel like when this plan is successful?

And the values, I would say, at the heart of it are, first of all, that if you work hard the system should be on your side and help you, rather than punish you. That’s why being able to earn £10,000 before paying tax is so important. That’s why allowing pensioners to keep more of their savings, get a decent income in retirement and not to have to take out an annuity, so they can spend their money as they choose. That’s why that value – about trusting people, helping people and recognising the worth of working hard and saving – is so important.

But perhaps the most important value of all – particularly at a time when people see economies struggling, and, worldwide, the difficult positions people are in – most important value of all is stability and security. Giving people a sense that we want to help you have that security and stability in your life, whether that’s about helping people to get a job, whether it’s about helping people to start a business or whether it’s giving people that dignity and security in old age. Those are the values that lie behind this plan and this budget was very much in line with this plan and I’m really pleased about the steps we’ve been able to take to help pensioners have that dignity and security, to reward saving and to say, “It’s your money to spend as you choose.”

But I’m sure there’ll be many other things that pensioners want, that future pensioners are worrying about, that you want to ask me about today. So please don’t hold back; any question you like and I will do my best to answer it.

Question

Thank you. Prime Minister, I’m not going to talk about pensions; I’m talking about inheritance tax. And I recall your promise when you came into power – or just before you came into power – about inheritance tax was going to have a quantum leap – I think it was about £1 million – and now we see that it’s not. A lot of us save not just for ourselves but for our children, our grandchildren, and in this particular area we see house prices rising year on year, in fact, month on month, and yet we’re not being able to pass on a lot of that inheritance because most of our equity is tied up in a house. So that 1 issue, I think, gives us a lot of concern. Are you able to address that?

Prime Minister

If we go back – I’m not going to give you a history lesson, sir, I wouldn’t dare – but if we go back to 2007: in those days you could only – the threshold for inheritance tax was £325,000. And if you remember, George Osborne – then shadow Chancellor – made this speech and made this promise that we wanted to radically change that and lift it to £1 million. That was our aim. Straight away after that, Gordon Brown – realising what a brilliant pledge it was by George Osborne – then changed the rules so that you could pass between husband and wife, and also between civil partners. So the effective threshold for inheritance tax went from £325,000 to about £700,000.

But would I like to go further in future? Yes I would. I believe in people being able to pass money down through the generations and pass things onto their children. I think you build a stronger society like that. And I think, of course we should – you know, you have to have caps and limits and we have to think about those, but generally speaking we should be encouraging people to pass things on to their children. And 1 of the reasons why George Osborne made that pledge was this point about property, was that when the limit was £300,000 or so, quite a lot of, you know, hard working families who’d worked hard, who’d saved, who’d put that money into their house, were being caught by inheritance tax. And inheritance tax should only really be paid for by – only really be paid by the rich; it shouldn’t be paid for by people who’ve worked hard, who’ve saved and who’ve bought a family house in Peacehaven for example.

So the ambition is still there; I would like to go further. It’s better than it was [Party political content] but it’s something we’ll have to address in our manifesto.

Question

I wonder if I could ask you a question about infrastructure? We’re in this great county of Sussex – West Sussex, Brighton and Hove, East Sussex – 1.5 million people, but a bare 5 miles of motorway, Prime Minister, in the whole county. Is it possible you could ask the transport secretary to look at that motorway deficit, particularly in respect of lack of East/West motorway and the possibility of expansion of Gatwick Airport?

Prime Minister

Well, first of all, on the Gatwick Airport, I can’t really say anything about that because we’ve got the Davies Review that is looking at our airport capacity, and he’s said there are really 3 options. He said we need more – we need more capacity. Not immediately, it’s not a panic, but he says we do need to add another runway if we want to try and keep our hub status as a country. And he’s got 3 suggestions: he says that there is the Heathrow suggestion, the Gatwick suggestion, or possibly – the east of London option.

So all of those 3 are being looked at. I think he’s doing a good job. 1 of the things he’s done is stop people panicking about this issue. He says that it has to be addressed but we don’t have to do it tomorrow, but we do need to make a decision in good time and we will in the summer of next year.

In terms of roads, actually I would say this government has stepped forward with quite a lot of investment into road and rail schemes. I know sometimes in places like Sussex people say, “Well all the money’s going to go on HS2.” Does anyone think that; all the money’s going to be wasted on HS2? Here’s the fact of the day for you: in the next Parliament, we’re going to spend 3 times more on other road and rail schemes as we will on HS2. I think HS2’s really important, it’s actually going to link up our country, it’s going to help drive economic development through the Midlands and the North and bring the country together – but we’ll be spending lots of money on other things. So there will be money available for pinch-point schemes in places like Sussex, for road and rail improvements. In terms of motorway deficits I’m very happy to look at what you say. There have been some specific road upgrades in Sussex in the last few years, but we we’re happy to look at more.

Question

I’m 70 years old. I have a pension pot which I haven’t touched yet, but I’ve been looking into an annuity. With the budget changes, what benefits do you see for my pot?

Prime Minister

Right. Okay. One of the most important things in the budget is the money for face-to-face financial advice, because I think this is a very complicated area – pensions – and people really need to have good advice before they take a decision. What we’ve decided to do, sir, and this may help you – I don’t know your own circumstances – we’ve got the bigger decision that happens in April 2015, which ends the need to have to buy an annuity if you’re in a defined contribution scheme, and most people are now in defined contribution schemes. But even before that, we’ve taken a set of measures that help people to draw down income from their pensions by changing the rules around that they help people take a bigger cash lump sum, including in small pension pots, and they change some of the tax circumstances around those things. So my advice would be to talk to your own financial advisor, see your own circumstances, and whether these changes can help you.

Behind them all is a very simple piece of thinking, which is that you’ve worked hard, you’ve saved during your life. That money in your pension pot is basically your money and you should have greater freedom to spend that as you choose.

Now of course you then get the argument – and we’ve heard a bit of this over the last few days – “Well, if you allow people to spend their own money, they’ll blow it all on a cruise; they’ll spend all the money, and then where will we be?” Well first of all I’d say it’s deeply condescending to say to people who’ve worked hard, who’ve saved all their lives, who’ve been thinking about the future –to say, “Well you can’t trust them to spend their own money because they’re irresponsible people.” They’re not irresponsible people; they’re responsible people. That’s why they saved in the first place.

But if you want to get technical there’s another reason for feeling confident about this change which is that we’re changing the basic state pension system in this country. Right now, as you know, you get your basic state pension and then there’s a minimum income guarantee and a top-up through the pension credit which takes you up above £140 if you’re a single person. And what we’re doing is we’re replacing that basic state pension and the pension credit top-up – replacing it with what’s called a single tier pension, so when people retire, they will retire on a basic state pension of above £140.

Now why that matters so much is because it is lifting people out of the means test, it’s lifting people out of that pension credit top up, so even if they do go and spend lots of money on certain things they’re not going to be reliant on a means tested system. They’ll be reliant on the basic state pension which will have lifted them above the means test system. So I would argue this is the right thing to do; giving people more opportunity to spend their own money as they choose, giving people more freedom, but it’s also the right time to do it, because we’ve changed the system fundamentally so that it wouldn’t have the bad consequences were people to go and blow all their money. But I don’t believe they will, because I don’t believe people are fundamentally irresponsible; I think people are fundamentally responsible. I believe in trusting the people, a slogan my party came up with at the turn of the 20th century, and I think we should stick to it now.

Question

All I want to do is say thank you. I’ve been holding on to my trivial pension since you got elected, and I’ve been asking you to change it to what it is now. If I’d have cashed my pension in when I should have done, I’d have had 25% and £14,000 a year pension. Now, I can draw the whole lot out and thank you very much indeed.

Prime Minister

Thank you. I mean, there’s – what’s interesting about this argument is that we were – when I was a back bench MP – I was elected in 2001 – there was a private member’s bill then called the Curry Bill, and it was to try and abolish the need to take out an annuity. And we went along and we voted for this bill Friday after Friday, and tried to get it through, but even that bill wasn’t as good as what we’re doing now because there was no single tier pension proposal then so even an abolition of annuities proposal still had lots of small print about how much income you had to have before you could guarantee that you wouldn’t need an annuity. And so it’s this single tier pension move that’s made it possible to do what we’ve done, and I’m really glad that it’s going to benefit people like you.

You still pay tax on it, of course. You draw it down, but you pay it at your marginal rate and this is a really good argument, because then you can draw down money year after year in a way that makes sure that you pay tax on it, but you pay at your marginal rate, rather than pushing yourself up into a higher rate.

Question

The budget seemed almost perfect. What has George got left for next year; he needs to pull a few rabbits out of hats. Has he got anything left?

Prime Minister

Well, I mean, budgets are – it’s a very dramatic event, the budget, isn’t it? I think we all – it’s sort of a national event. I’m not sure other countries get quite as excited about their budgets as we do. But you know, a budget is only as good as the underlying economy that it is commenting on, and I think while, you know, I’m very keen today to talk about these important steps for pensioners and trusting people to spend their own money as they choose and rewarding savings, actually, in a way the real news in the budget was that the economy is improving. We still haven’t reached the peak that we were at before the crash, as it were, but we’re working our way back and the really encouraging thing is we’ve seen 1.3 million more of our fellow countrymen and women in work – that’s good news – we’ve got 400,000 more business operating in Britain, we’re exporting more to fast growing markets on the other side of the world.

So the economy’s on the mend but there’s a lot more work to do. What George and what I and others will be thinking about for next year’s budget will depend on how well the economy is doing and whether we can continue to make some progress in helping people to keep more of their money to spend as they choose. But that’s what it’s all about – budgets are great events, great buzzy events – but in the end what really matters is the long-term economic plan, turning the economy around and making sure we have an economy that is delivering a recovery for all. Because the truth is there’s still lots of people in our country, who – they may have found work, they may have found that job, but earnings are still going up quite gradually, prices in the shops are still quite high, people are still feeling that it’s a very tough set of circumstances, recovering from this very difficult, long and great recession. But we are getting there, and if we stick at the plan, we can make sure more people feel it.

Question

There are many people who’ve worked hard all their lives, done the right thing, as you rightly said, and when they get to pension age they obviously are, so-called, wealthy. Are you able to give any commitment on withdrawing Winter Fuel Payments and bus passes for so-called wealthy pensioners.

Prime Minister

Well I made a very clear pledge at a Saga gathering, and I made it again at the election, that we should keep the pensioner benefits. Obviously all pledges are about the Parliament that you’re going into and we make new pledges in our manifesto for the next Parliament. But we said very clearly we would uprate the basic state pension, keep the Winter Fuel Allowance, free TV license, the bus pass, the cold-weather payments, and we’ve done all of those things. We’ve kept our promises in all of those areas.

We’ll set out our policy for the next Parliament at the next election. I don’t want to pre-judge that. The only thing I would say to people who think you save lots of money by not giving these benefits to top-rate tax payers is that you save a tiny amount of money and you always introduce another complexity into the system. But we made our promise to this Parliament, we’ve kept our promise in this Parliament. I’m very proud of that, because I don’t think older people in Britain should be asked to suffer for the difficult decisions that we have to make. Making promises and keeping promises is a very important part of politics so woe betide the politician that makes one of these big promises and then says “Oh, sorry, I didn’t really mean it.”

Question

We’ve just very recently done a scrutiny in Brighton & Hove on the effects of alcohol in the city, because we do have quite a problem with binge drinking etc, and 1 of the things that came out of that was the amount of excessive drinking that is done in people’s homes by older people. It’s something that really came to the fore, and I just wondered if you could tell us what the thinking was in reducing the tax on beer by a penny a pint, and were health issues taken into account when that was considered?

Prime Minister

Absolutely they were. I think the decision behind the beer duty is really much more about our pubs.

We do have a problem in terms of binge drinking, and sometimes that’s spilling over into violence and bad behaviour and anti-social behaviour on our streets. We do have a problem with that, and we have to tackle it in lots of different ways. We need to address, 1 of the biggest causes of the problems, which is excessively cheap drink provided by supermarkets deep discounting and that’s why we’ve passed this rule to say you can’t sell for less than duty plus VAT, and that will have an impact. I think there are all sorts of things we need to do in terms of policing and in terms of public order which we are doing, and the evidence is that the situation is getting better rather than worse.

But I don’t think we should take steps that would disadvantage the responsible drinker and the responsible pub,. Pubs have had a pretty tough time in recent years – a combination of the smoking ban, very cheap drink in supermarkets, some of the other regulations and all the rest of it. And I’m a great supporter of Britain’s pubs, I think they provide a sort of social glue to help bring communities together – the focus for the village, the focus for your part of the town – and so trying to help pubs by cutting beer duty, which we’ve done in both of the last 2 budgets is the right thing to do.

I did look at the idea of minimum unit pricing for alcohol, which is an idea that’s got a lot of merit, because you’re basically saying a unit of alcohol, however it’s consumed, should never cost less than, say, 40p, and they’re trying this in Scotland. And that wouldn’t actually put up the price of a pint in a pub, nor would it put up the price of a bottle of wine in a supermarket. But I think 2 things: 1 is, we should wait and see how it goes in Scotland, and see whether it works in Scotland, and the second thing is, at a time when families are having to take difficult decisions about budgets and everything else, I think it’s just a change too many. So I let’s let the duty plus VAT thing settle down, let’s see what happens in Scotland, but yes, public health concerns about alcohol, public order concerns about alcohol, very important part of what the government’s doing. But don’t let’s clobber pubs as we try and get this right.

Question

I can see that ending the annuities is very popular with many people, myself included, and I can see that spending money on cruises would be a very good idea. But you were talking about dignity in old age, and you’ve only got to visit hospitals where perhaps 60% of the beds are taken by elderly people who are called patients, to see that many people don’t have dignity. And it feels like politicians have been asleep by the fireside for the past 30 years. Isn’t the truth that a lot of the pension pot that I and others will take – isn’t that going to end up in the pockets of private nursing home owners?

Prime Minister

Well look, first of all, I would repeat what I said about giving people the choice. You don’t have to take out an annuity; you don’t have not to take out annuity: you’ve got the choice now; you can decide whether that’s right for you. If what you’re saying is, “Does dignity and security in old age have a lot to do with much more than money?” I absolutely agree with you. We won’t have true dignity and security in old age until we make sure our NHS really does everything it can to look after older people better. Now, there are some great examples of care and frankly there are some less good examples of care and the Health Secretary and the Care Quality Commission are now really shining a light on standards and quality of care.

I think we need to do a lot more on dementia. That’s why I’ve set a dementia challenge for the country. We’re going to double the amount of research that’s going in. We’re encouraging communities and people to become more dementia friendly, to learn about the nature of these diseases. We’ve got to stop this rather condescending and wrong attitude that dementia is just part of ageing. It isn’t. It’s a disease and we ought to be trying to tackle it like we’re trying to tackle cancer or heart disease.

But the point about care homes is also important, because I know there is a concern that, of course, if you take your money out of your pension pot and have it as your own money, then it counts as your money when you are assessed for care needs. That is true; that is the case. But, again, you have the choice: you can leave money in your pension pot or take it out. And also, we are putting in place a cap on the amount of money that someone can be charged for their care needs. And I think this was a very important step we took in this Parliament, a step we took very much as a coalition; we talked about it, it was a very big change. And I think there was a great unfairness that if you were hit, say, with dementia, sometimes at a relatively young age, you could be facing hundreds of thousands of pounds in nursing home charges eating up every last penny of savings that you had in your house, in your savings account or elsewhere. Putting a cap on the maximum amount that you can lose is a fair and a good step to take.

We haven’t solved the problem of dignity and security in old age but protecting spending on the NHS, protecting the pension, protecting the pension benefits and now allowing pensioners more freedom to spend their own money as they choose are all good steps forward.

Question

Now, talking of health, pensioners have nothing unless they have health to enjoy their life. The Royal Sussex County Hospital, our local large hospital, in fact has had planning permission – you know where I’m going now, I think – has had planning permission for a massive extension which will be beneficial, should the need arise, to everybody here in this room. Could you assist to get the capital released to enable the build?

Prime Minister

You’ve given me a very clear message. I can’t say anything about it now. It’s something that the Treasury and the Department of Health are looking at. I know how important it is. You know, this is a vibrant city and people want to see really good health services in their community. So message received and understood.

Question

What can you do or what would you like to do where people own their own homes and when they go into a nursing home they’re made to sell their homes to pay for their care, whereas somebody that has not got their own home, they get exactly the same as I or any of my friends would get that have to pay for it and it costs them nothing? After all, national health is from the cradle to the grave and not everybody needs a nursing home.

Prime Minister

That’s absolutely right. It’s what I was discussing with the gentleman here. I mean, I think there has been this unfairness in the system in that you can have 2 people living next door to each other; 1 person’s worked hard, saved, bought their own home, the person next door has not done any of those things. The person next door without the savings, without owning the home, gets the whole of their care paid for while the person who’s saved gets charged. That’s why we’ve brought in the Dilnot cap, so that there’s a cap of £75,000 on how much you can draw down in terms of paying for that care. This should mean – because this is early days in terms of this policy coming in – that no one has to sell their home to pay for their care.

What we’re hoping it’s going to do once we’ve brought the cap in and said there’s a maximum that you can have to spend on your own care, is drive the creation of a really exciting insurance market so that people can insure even against losing the £75,000.

Now, this is all coming in in the next few years, it hasn’t started yet, so this insurance market hasn’t taken off in the way that I’d like yet, but it will. It’s an expensive step we’ve taken, because obviously, tragically, lots of people are having to sell their homes to pay for care now, but the ideal is a situation where you’ve got a cap, you’ve got an insurance market, no one has to sell their home to pay for care. And even if people choose to, they should be able to delay that into the future.

So that’s the aim, and I think again it links to this thing about dignity and security in old age, which is absolutely what drives me and drives this government in terms of coming up with the right policies.

Thank you very much indeed.