The Pensions and Lifetime Savings Association has urged the next government to increase auto-enrolment contributions as part of its four-pronged approach to improve workplace pensions.
In a policy manifesto for the up-coming election, the PLSA said the next government should increase contributions to 12% of salary by 2030, split evenly between employer and employee. While auto-enrolment has proved a success story, it warned that the current contribution rate of 8% would be unlikely to provide savers with a good standard of living in retirement.
The trade association also called upon the government to implement current policy to scrap the Lower Earnings Limit for auto-enrolment as soon as possible and ensure any solution to tackle social care funding is not at the expense of existing and extra pension savings.
To increase consumer engagement with retirement savings, the PLSA said it would like to see the government throw its support behind the development of the Pensions Dashboard, ensuring the first one is non-commercial, protects consumer information and includes the state pension.
The government should also seek to put in place the right funding regime for defined benefit schemes, following the collapse of high-profile schemes such as Carillion and BHS. According to the PLSA, the Pensions Regulator should be given new powers to take action sooner, impose fines and have more oversight of risk corporate transactions in order to prevent reckless behaviour and protect savers.
And in a final bid to protect savers and help employers, the PLSA called upon the government to press ahead with proposals from its 2018 white paper to strengthen protection for savers by allowing consolidation and the creation of superfunds to protect member benefits. This would also create an incentive and achievable goal for employers to accelerate funding into schemes, the PLSA said. Defined benefit schemes should also be allowed to enter into a superfund at a lower cost than insurance buyout, giving employers greater flexibility.
Nigel Peaple, director of policy & research, PLSA, said: “The Pension Schemes Bill must be reintroduced as soon as practicably possible. After that, and with the retirements of millions of people hanging in the balance, the next Government cannot allow pensions to become a back-burner issue.
“Ensuring adequate contributions, fostering effective engagement and allowing well-run schemes to operate at appropriate scale provides the blueprint for making the greatest difference to the greatest number of savers. Together with the pensions industry, the Government must seize this enormous opportunity to help more people achieve a better income in retirement.”
