The Sunday Times is putting forwards a five-point pension plan (my comments in italics).
• Give savers the chance to top up ten years’ worth of national insurance contributions to boost state pensions
Verdict ; yes please
This preserves the option people have right now to buy added year and months s of pension credits for the state pension. It is akin the Arun Muralidhar’s Selfies proposition and a variant on the principal of exchanging today’s pounds for pension pounds. This is hugely worthwhile so long as the rate of exchange remains “fair value”.
• Increase employer pension contributions to a minimum of 5 per cent through auto-enrolment
Verdict ;5% of what? End confusion
I agree that AE contributions should go up but should they cover all earnings and should there be an earnings trigger below which people have to opt-in rather than out? The current proposals for AE reforms have yet to be implemented, there is only a promise to introduce them in the “middle of the decade”. It is wrong to say that employees pay 5% , they pay a minimum of 4% and if higher rate, less, a large amount of AE contributions come from the public purse, including the “boost”, where salary sacrifice is involved. This is so complicated that we need a proper review of incentives (As the IFS is professing to do)
• Ensure employers continue pension contributions for staff on statutory maternity or parental pay so that parents do not miss out
Verdict; this would have marginal impact and distracts from more urgent reform
Being aware of inequalities is not the same as solving them. The big issue around inequalities is “sharing” and the fact that most households are no longer “nuclear”. Divorce and separation are much greater causes of inequality and we need to put reform into ensuring partners (especially women) are fairly treated after a split-up
• Increase in line with inflation the amount that can be paid into a pension of someone not working
Verdict ; do it in the next budget
This is very sensible, the £3600 limit has not been reviewed in a quarter of a century
• There should be a dedicated pension commission so that all parties agree big pension changes
Verdict; If we need a pension commission, it should be agreeing fundamentals , not policing tinkering
There is cross party support on pension policy. The very much over-blown argument about LTA is the exception that proves that rule.
This campaign is born out of a sense of looming crisis. Generations of savers have been told they are sleep-walking into later life impecunity , but the current generation of retirees (my generation) are now being told we’re having it too good.
The reason some of us have good pensions is because the system which we were apart of in the 20th Century was dismantled in the 21st century to make way for a democracy of saving better described as “beggar my neighbour”.
We need to get back to basics and work out what we are saving for. If it is for individual pots of wealth to be managed by IFAs, then pension policy is about the mass affluent (a rich person’s sport). I think pensions are about giving people dignity in retirement through a wage that lasts as long as needed.
We need a campaign that repeats what the Australians are trying to do, and gets a proper purpose to retirement saving.
Campaigns need focus
We are in an election year so campaigns are in vogue.
There are any numbers of pension campaigns in circulation, supporting everything from ESG to Mansion House reforms, advice to guidance, simple statements to pension dashboards.
The focus of this campaign seems to be an awareness that certain people are not saving enough and not having enough put by for them.
This will resonate with the financial services industry that takes rent on all money under management and advice, but not with the wider public.
People are confused and suspicious of pensions and want a clear framework where a pension is a pension. Let’s keep an eye on that prize. We need to do something now it’s true, but that something is about restoring confidence in the pension system.
Thanks to Johanna Noble – I’d like to meet with her and explain this point of view. It is right for the Sunday Times to run this campaign, I only wish it had a sharper focus
Millions of people are chronically undersaving for retirement. Today we launch our Plug the Pension Gaps campaign, urging the government to take action 👇https://t.co/3odmZZUYKY
— Holly Mead (@holly_mead_) February 11, 2024