Under David Cameron millions of working families facing a cost-of-living crisis are finding it harder and harder to save for their retirement. The amount the country saves is set to fall across the next Parliament so for millions the cost-of-living crisis could continue well into their retirement.
Getting more people save is good for everyone, taxpayers, savers, business and the wider community. The IFS estimates that more than 1 in 10 of those currently aged between 50 and the State Pension Age are on course for a pension income at retirement of less than the level of Pension Credit, so likely to be reliant on means-tested benefits to avoid poverty. And getting more people to save today will help control the benefits bill for future generations.
That’s why I believe that the proposals I set out in a speech to the Resolution Foundation today were so important in preventing today’s cost-of-living crisis continuing for tomorrow’s pensioners, and making sure that more workers can look forward to their retirement.
But while Government ministers rarely praise speeches by their political opponents the astonishing response from the Pensions minister to my speech to the Resolution Foundation was certainly a surprise. He condemned the plans which Labour are considering to help an additional 1.5 million working people save for a pension. His condemnation says everything you need to know about the priorities of this government, they put a privileged few before hardworking families.
The proposals to include the 1.5 million workers, over 1 million of whom are women, in workplace pensions build on the work done by the Pensions Commission established by the last Labour government which set out a plan to help more people save into workplace pensions. But the Government excluded 1.5 million people from workplace pensions when they increased the level of earnings needed to qualify for auto-enrolment.
So today I announced that Labour is considering proposals to lower the earnings threshold for automatic enrolment in a workplace pension scheme from its current level of £10,000 to the Lower Earnings Limit for National Insurance, currently £5,772.
Clearly the idea of helping people who work hard in low-paid jobs to save for a pension is not something this out-of-touch government backs as the Pensions Minister tweeted this morning;
‘Extending pensions auto-enrolment to those for whom it may not make financial sense would be unfair and irresponsible.’
It’s quite a state of affairs when we have a Pensions minister who says that 1.5 million workers should not be saving for a pension. It’s sadly another example of this out-of-touch government who have imposed the policies like the bedroom tax and granny tax on the country. When Steve Webb thinks about pensions he clearly thinks of those who can afford to buy a Lamborghini with their savings, not the millions of ordinary workers working hard to put aside modest savings for their retirement.
In addition to helping more working people to save for a pension I also announced the creation of a new independent taskforce to boost the retirement income for savers. It’ll be chaired by Professor David Blake, Director of the Pensions Institute and it will look at two important areas; the introduction of collective pensions to the UK and how to ensure savers get the best deal in the retirement market.
Collective pension schemes in the Netherlands and Canada, have boosted retirement savings by up to 30 per cent. Today I announced that Labour would legislate to enable these schemes in the UK. I am determined that Labour will always be on the side of people who save and we’ll act to ensure they get the best possible deal when they turn their savings into a decent retirement income.
So while I welcome the new flexibilities announced in the Budget, I am concerned that savers could be facing new fees, charges or pension products which offer poor value that could take nearly a third out of their savings.
My speech today shows how a Labour government is determined to back people who do the right thing, work hard and save for their retirement. People who work hard to save need a government that’s on their side. Earlier today when the Pensions Minister argued against helping those on modest incomes to save for a pension he reminded us how out of touch his government are. We cannot afford to be two nations in retirement where the benefits of growth accrue to only a few, while the majority of working people feel left behind.
A Labour government will help more people to save to ensure retirement is something to look forward to, not something to fear.
Rachel Reeves is Shadow Secretary of State for Work and Pensions