Sir Keir Starmer should promise that a future Labour government would introduce a new workplace pension for self-employed workers and more generous retirement provision for the low paid, a leading left-of-centre thinktank has said.
Calling for the biggest shake-up of the pensions’ system in two decades, the Fabian Society said Labour needed to copy the radical approach of the Turner Commission two decades ago, which encouraged saving through opt-out schemes.
The thinktank said the sharp decline in the numbers of self-employed workers saving for their retirement meant HMRC should create a new pension for more than 3 million people who work for themselves and earn more than £10,000 annually.
Under the proposal, a self-employed worker’s digital tax records would be linked to a pension account and deduct 5% of earnings by default. The government would pay a bonus of 3% of earnings in place of the pension contributions from their employers that employees receive, and there would be the right to opt out.
A Fabian report, sponsored by the Association of British Insurers (ABI), said the proportion of self-employed workers saving for a pension had plummeted from 48% in 1998 to 16% in 2018.
The report also called for:
Increasing the minimum contributions for workplace auto-enrolment pensions to 12% of total earnings from the current 8%. This would be done by phasing in higher contributions from employers over time.
The introduction of new pension credits for carers, who are primarily women, to reduce the “gender pensions gap”
Changes to how people access pensions at retirement so that separate pensions are automatically consolidated into a single fund and then converted into new whole-of-retirement pension plans designed to increase with inflation.
Andrew Harrop, the general secretary of the Fabian Society and author of the report, said: “Workplace pensions have come a long way since 2002 when the Labour party set up the Turner Commission. But after two decades of debate and reform, private pensions still do not promise adequate retirement incomes for most people.
“As we approach the next general election, politicians from all parties should commit to major new reforms. We need a pension system where everyone gets help to save enough to meet their future needs, and where the savings people build get converted into incomes for life that will rise with the cost of living.”
Rob Yuille, assistant director, head of long-term savings policy, at the ABI, said: “We welcome the Fabian Society’s ambition to increase overall pension contributions to 12%, which we think should be introduced gradually over the next 10 years. Calls for a solution to help self-employed people save for retirement is also an important measure, as too few are currently saving into a pension.”
