The pensions minister wants the minimum employees pay into workplace pensions increased above the current 8%
Guy Opperman, the pensions minister, has confirmed he wants the minimum employees pay into their workplace pension to increase beyond the current 8%, but said the Pension Bill was not the place to trigger a rise.
At the launch of his Bill today in Westminster, Opperman said he also shied away from cutting the £10,000 auto-enrolment threshold, and changing tax relief rules that mean some lower paid workers miss out, until he saw the result of two contribution hikes.
He said: “I took a view auto-enrolment wouldn’t be in this Bill. We’ve had a double jump in minimum contribution increases and won’t know the impact of that until December this year, and that will need to be analysed in great detail. Currently employees pay in 5% and their employer 3%.
“I absolutely want to go further than 8%, but want to know how businesses will handle that. We will be revisiting auto-enrolment legislation in the next couple of years.”
The Pension Bill was included in the Queen’s Speech on Monday. In it was a fresh attempt from the government to crack down on fraudsters, first proposed in 2017, to let pension companies block a transfer where there is evidence the destination is a scam.
Victims of pension scams lost on average £91,000 each, according to Action Fraud figures from 2017.
The Bill also confirmed the creation of pension dashboards, online tools to let savers see all of their retirement pots in one place, will go ahead.
Opperman said: “It is quite clear pensions are several years behind the banks, but I do believe there is great scope. It’s going slower than I’d like but they’re dealing with a lot of data.”
He admitted the public were still hazy about what benefits pension dashboards, long debated in the financial sector, would provide for them as consumers.
“Until your pension is available in a digital format it is difficult to sell that idea. Our focus is to get all the consultations and everything done and to get the Bill through,” he said.
Yvonnne Braun, director of policy, long term savings and protection at the Association of British Insurers, called dashboards “the next stage of auto-enrolment”, and to helping savers find lost pensions.
She said: “In trials consumer engagement figures have gone through the roof.”
Jack Dromey, shadow pensions minister, said the Bill was “welcome”, but expressed reservations about the creation of commercial pensions dashboards by the private sector, which are due to follow after the launch of a government-backed basic version.
Mr Dromey said: “This is a welcome Bill but it doesn’t solve all the problems in the pension landscape.
“The dashboard approach is not quite what I would have wanted to see, which was a public dashboard, but crucially we need to inform citizens as to where they are [with their pensions] so they can plan for their future.”
He roundly praised the Bill for giving life, if passed, to collective defined contribution pensions, deployed first for the Royal Mail scheme but open for other companies to adopt.
So-called CDC pensions are seen as a half-way house between the guaranteed income provided by defined benefit pensions, and the full exposure to the ups and downs of stock markets that savers into defined contribution schemes face.
“I absolutely agree that CDC is a groundbreaking concept that has immense implications for the pension landscape, where we have declining DB schemes and the move to DC both building up huge problems,” Dromey said.
Savers into CDC schemes will still have access to pension freedoms, it was confirmed in today’s meeting, unlike savers into DB schemes who first have to transfer out in order to withdraw as they wish from their retirement pot.
The Pension Regulator also gains tougher powers in the Bill, which creates a new criminal offence for company directors who neglect defined benefit schemes, with fines of up to £1 million.
This comes in response to a series of high profile corporate failures – most notably BHS and Carillion - which have resulted in members being hit with cuts to their pensions.
It will be a criminal offence for bosses to engage in “wilful or grossly reckless behaviour” in relation to defined benefit schemes.
Measures included in the Pension Bill, which have a degree of cross-party support already, need to gain backing among MPs to pass through parliament in order to become law.
However, this is uncertain as rumours abound a general election is imminent, which would likely mean a reshuffle of MPs, amid struggles to secure a Brexit deal.
How can he raise it whilst…
How can he raise it whilst wages are stagnating? If anything people will leave the scheme because they can't afford it - which works out well for Tory MP employers and their donors of course as less to pay out!
I wonder what he's planning…
I wonder what he's planning to use extra contributions for - repair his yacht? Considering he gets a platinum coated pension which he can claim from much earlier than anyone else he doesn't have to worry about being poor because he can't afford the pension contributions being a millionaire as well he doesn't have to worry where his next meal is for life compared to those he's forcing into either pay in pension and face poverty or cancel auto-enrolment because they can't afford to lose over 8% of their wages and be poor in old age when they probably won't be able to get their pension until their dead (since they're forcing up the retirement age too!)