The run-up to UK’s general election on 8 June may very well be dominated by one topic – Brexit – but that has not stopped the country’s pension funds from listing their preferred priorities for the next government.
The Pensions and Lifetime Savings Association (PLSA) has called for political parties to include six pension-related topics in their manifestos, including helping defined benefit (DB) schemes to merge, increasing the minimum contribution for auto-enrolment schemes, and simplifying the state pension.
Graham Vidler, director of external affairs at the PLSA, said: “The next government needs to consolidate the growth of workplace pensions, increasing the reach of automatic enrolment and setting out a plan to raise contribution rates. It also needs to make it easier for schemes to make DB pensions sustainable.
“Above all, it needs to build public confidence in the system, helping the industry fight scams and deliver the retirement choices savers want, while resisting the temptation for further raids on the pensions tax relief piggybank.”
The UK’s first-pillar pension system has already hit headlines since prime minister Theresa May called the election two weeks ago.
Of particular focus is the so-called ‘triple lock’, which promises an increase every year based on inflation, average earnings growth, or 2.5%, whichever is highest. Recent reports have suggested that this could be changed to reduce the financial burden of the state pension.
A government-commissioned report by John Cridland, former director general of the Confederation of British Industry, recommended that the triple lock be scrapped and the state pension age increased to 68. It is due to rise to 67 by 2028 under current legislation.
The PLSA said the state pension was “affordable without further increases to the state pension age” but agreed that the triple lock should be replaced with “a simpler, fairer, and more affordable uprating mechanism” linked to average earnings growth.
Consultancy firm Mercer also backed calls for parties contesting the general election to be explicit in their plans for the state pension. Tony Wood, UK leader of Mercer’s health and benefits business, said John Cridland’s review “goes to the heart of many of the core issues raised in the current election campaign”.
“However there appears to be a distinct lack of commitment to the recommendations,” he added. “People need to plan well in advance, to be able to make the most of living and working longer, and it is imperative that all the recommendations of this review are addressed by those forming our new government and not kicked into the long grass.”
The government was due to discuss the state pension next week, but parliament has been dissolved ahead of the 8 June poll and no more policy work will take place until the next government is formed.
The PLSA listed five more areas of focus, including DB scheme consolidation. The trade body is a vocal advocate of schemes working closer together to reduce costs and improve governance, and has proposed the creation of “superfunds”.
It said: “The government should bring forward legislation to reduce burdens and enable pension schemes to share services or to merge, delivering better returns, saving money, and improving governance. This will mean a greater chance of members receiving their benefits. It will free employers to focus on corporate growth and it will return public confidence to the system.”
On auto-enrolment, the PLSA called for overall minimum contributions to be increased to “at least 12% of salary” by 2030, as well as extending the policy so it applies to workers aged between 18 and 21, self-employed people, and people in multiple jobs.
The trade body also recommended an authorisation regime for pension funds to reduce the risk of members transferring into fraudulent schemes. It called for improved help for members at retirement, and for the next government to review the pension tax relief system to ensure it is sustainable and incentivises saving.