Big Interview: The quiet revolutionary Pensions Minister Steve Webb

HE was once dismissed in unguarded remarks by his party leader as "lacking ideas", but Pensions Minister Steve Webb has come a long way since Nick Clegg was overheard discussing his then front bench team a little too candidly on a plane to Scotland.

Steve is one of few ministers to stay in post for the full five years of the Coalition, something which has allowed him to push through a radical reform agenda.

"When I came in the job in 2010, I had had ten different predecessors in the last 13 years and I had some sympathy with each of them as pensions is a long-term business and it takes a long time to get things done," he says.

"I said right from the start that I was clear about what I wanted to achieve and that we don't want constant chopping and changing. I wanted to set a direction of travel then progressively deliver it and in fact we have pretty much delivered what I set out to do at the start.

"Taking the state pension reforms from green paper to white paper, draft bill to bill and now sitting down with people and giving them a real forecast for what they will get in the future, seeing that through from start to finish has been fantastic."

How does Steve respond to people who think his reforms are really preparing the ground for the eventual scrapping of the state pension?

"You do hear people say that," he says. "First, I would say that perhaps there wouldn't be a state pension in future if we hadn't made the system more sustainable. One way we have done that is to link the state pension age to the length people live. Each time we find out people are living a year longer, we'll put two-thirds of that on working life and one-third on retirement. So pension ages will continue to rise but so will the length of retirement. Otherwise it's just a massive tax hit on working age.

"Second, is any government going to say to near pension-age people 'We are going to get rid of the pension'? I can't imagine that."

So Steve hopes he is leaving the state pension secure, but what about the pensions industry? It's certainly been a roller coaster, culminating in the shock announcement in last year's Budget that people will no longer have to buy an annuity with their private pension pot but can do what they like with the money. It turned the industry on its head.

"I don't think the annuity is an evil product," says Steve although some in the sector might not believe him. In fact he goes as far as to suggest they've had a bad press as longer life expectancy and low interest rates lie behind the lower returns many people get.

"But people weren't shopping around enough and they weren't getting enough extra for ill health," he says. "There had been lots of attempts to make the annuities market work and they just weren't cutting the mustard. I would talk about auto-enrolment (of workplace pensions, more on that in a moment) and people would say to me 'Yes, but at the end I've got to buy an annuity and they're not very good value'.

"There is still a place for annuities in the market but the providers are just going to have to work a bit harder to find it - and that's a good thing."

He added: "Since the Budget more people feel more positively about pension savings and I think that's great."

It's not just sections of the pensions industry who might think Steve has been a thorn in their side during his ministerial term. The automatic enrolment of workplace pensions - meaning employers must put everyone into a pension scheme - wasn't his idea. The initial legislation was done by the previous Labour government, but Steve has been responsible for driving it through. And that means more red tape and expense for pretty much every business at a time when they would argue they've had enough on their plates with a global recession.

He is unrepentant. "I recognise we are asking employers to take on a new task," he says, "And I understand if someone says 'That's a cost and burden to me and I'd rather we didn't have to' but in terms of the millions of workers in the private sector who have no private pension - we've tried everything else!

"We've tried stakeholder, tax relief. all sorts of schemes to try to get people opting in and we've just failed. When I started we had got to the stage where just one worker in three in the private sector had a pension. That had been falling for 50 years. The remaining two thirds would only have the state pension to live on.

"The beauty of auto-enrolment is that we've all got the chance to opt out but we've all been stunned by how many people are staying in - 90 per cent have stayed in.

"Partly that's credit to the employers so far who have put money in to give their workers the information.

"It's a different kettle of fish if you're a very small business and I understand that. What we've tried to go is get the balance right between doing what we need to do and minimising the burden. One example, when I started you would have had to enrol someone who earned above the national insurance floor which was about £5,500 a year. We said that's far too low and put it up to £10,000 so you don't have to enrol someone unless they earn that.

"Another example, you used to have enrol someone as soon as they walked through the door.

"We've given a three-month window so you don't have to enrol a Christmas casual worker."

Steve points out that the process is halfway through in terms of employee numbers, with five million people now enrolled. However most of those are from the big employers, with the many smaller firms still to go through the process which could create a bottleneck due to the sheer volume of businesses.

The minister hopes it will go smoothly. He says they have been putting a small sample of micro firms through to test the systems for them and tweaking things as they go.

"It will be a different proposition for smaller firms," he says. "For the large firms they wanted pensions tailored exactly for their workforce whereas it's going to be bulk commodity for the small firm. 'I've got one employee above the threshold, I want to comply and enrol them and that's it'.

"Actually it can be a lot simpler for small firms. If you've got one employee and they always earn above the threshold, you meet them every day so you give them legal paperwork but you talk to them all the time, as against a firm that's got 17 different payroll systems, with casual and permanent workers.

"Although it's cost they could do without, for many small firms it will be relatively straight forward."

He also believes the bigger firms going first has given the industry time to catch up. For example payroll providers now have auto-enrolment modules on their software. "They didn't on day one," says Steve. "They've had to write them. That kind of infrastructure is more in place now than two years ago."

One concern was that small companies would find no one wanted their business. The returns on their own investment for the pension providers are not so attractive if you have five employees rather than 500 or 5,000.

That's why the Government created the National Employment Savings Trust (NEST), but in reality Steve says the market has responded better than he had expected.

"Nest is there because we couldn't be sure that anybody would be interested in the very smallest of firms," he said. "But there has been more appetite than we thought from the private sector. There are two other main social providers - the People's Pension and NOW Pensions. People such as Legal & General have gone much further than we might have expected and there are others. I think the small firms will have more options than we might have thought."

With staging dates looming for most small and medium-sized firms, Steve is urging employers to act.

"We are going to write to every remaining employer, so they will be notified," he says. "There's a whole sequence of letters 12 months out, six months out."

For those who fail to comply, there are penalties, but the minister hopes they won't be needed. "The regulator's focus is educate and enable," he says. "Yes enforce too because there is a legal duty but I don't want to raise a penny in fines."

Pensions might be boring to some, but it's clearly been where the action is in government this past five years. How much of that has been down to Steve, an unassuming, churchgoing Liberal Democrat?

The state pension reforms have been his baby and while he didn't start auto-enrolment, he has put a lot into delivering it. The recent changes around annuities he says are more of a product of Coalition. "If the Chancellor hadn't wanted to do it, it wouldn't have happened," he says. "But I've been banging on about annuity reform for 15 years now. So it was the right combination of people. As a liberal, the idea of letting people do what they want with their own money works for me but it works for the Chancellor too."

And having Nick Clegg, despite those past comments, in his corner has been vital. "If Nick Clegg and Danny Alexander hadn't been batting for the pension reforms it would have sunk," he says. "It wasn't in the Coalition agreement. I would see Nick and explain what I wanted and why it's good for the Lib Dems but when the four of them (Clegg, Alexander, George Osborne and David Cameron) sit down together I'm generally not in the room."

The minister has enjoyed being in Government. "When you've been in Opposition for 13 years it's good to have the opportunity to actually do things," he says. "Opposition is important and being a local MP is important and that was all I assumed I would ever be, but there is that special thing about being able to bring to the fore the things you believe in." He would love the chance to continue, but that all depends on the outcome of the next election.

No one can take reelection for granted, but Steve is one of the safest Lib Dems in a region that had until very recently been a stronghold for the party. A recent poll suggested a worst case scenario where all but two of the party's South West seats were lost but even then Steve and Yeovil MP David Laws would survive.

Whatever happens, however, the Thornbury & Yate MP has no plans to take a run at the leadership should the post become vacant after the May 7 ballot.

"Categorically not," he says. "I've found my niche, a role where it's what I enjoy, what I hope I'm good at and I'm very positive about what I've done.

"To be leader of any party frankly is an awful job. I discovered what I really like is focusing on something a bit technical, detail, gnawing away at it, whereas the leader's job is very generalist. You have to cover every subject, you have to do the party politics, it's so broad and requires a particular set of skills that I don't have. I have no aspirations to that."

How about a career outside politics then? "Maybe one day," he says. "It's a funny profession. You take a decision once every five years and I've nailed my colours to the mast for the next five years, unless the electorate has something to say about it.

"But I could at some point think of working the world of pensions or something else."

So whenever he does walk away from Westminster, the pensions industry might not have seen the back of Steve Webb yet. Perhaps next time day he'll revolutionise the industry from the inside.