Pension priorities for the general election
Following Theresa May’s snap general election announcement, organisations of all shapes and sizes jumped into action to share what they wanted to see in the various parties’ manifestos.
As the house dissolved on the 3rd May, The Pensions and Lifetime Savings Association unveiled a list of six pension priorities that covered auto-enrolment, defined benefit, scams, help at retirement, the state pension and tax relief. While we believe that changes to each of these are vital to the success of pensions in the UK, the two that garnered the biggest headlines were perhaps unsurprisingly the state pension and auto-enrolment.
Keeping the triple lock could add around 1 per cent of GDP to the cost of the state pension by the middle of the century
The state pension plays and must continue to play a crucial role in providing decent retirement incomes for all. However, how this might happen is a matter for debate, as keeping the triple lock could add around 1 per cent of GDP to the cost of the state pension by the middle of the century – resource which could arguably be used to fund other essential services. One way of reducing that cost is still further increases in a state pension age already set to be the highest in the OECD.
But we believe a fairer way forward is to remove one of the three locks – the arbitrary 2.5 per cent – and, as John Cridland’s independent review suggested, stick at 68. State pension would still be linked to earnings growth, enabling it to keep pace with working age incomes. Indexing in line with earnings will also allow the state pension to maintain its current value of around 30 per cent of average earnings.
On top of the state pension, most people will need a decent level of private savings to top up their income. That’s where auto-enrolment comes in. It’s already a huge success and since 2012, 7.6 million more people have been automatically enrolled into workplace pensions. This will deliver a real improvement for many people’s retirement incomes, and the next government can build on this. But at the moment, the minimum legal contribution is 2 per cent of a band of earnings, which means someone on £25,000 would only be putting away £382.48 a year.
To improve people’s retirements further, it is essential that minimum overall contributions increase to at least 12 per cent over the next decade, with steps taken now towards this goal. We believe the next government should also extend auto-enrolment to include 18-21 year olds, self-employed people and those in multiple jobs paying low salaries totalling £10,000 or more.
Our election manifesto is about making sure we’re fulfilling our main objective of helping everyone achieve a better income in retirement. By making the next government aware of the key issues that our members – and those they represent – believe need addressing we can get more money into retirement savings, get more value out of those savings and build the confidence and understanding of savers.
Graham Vidler is director of external affairs at the Pensions and Lifetime Savings Association