To help solve the crisis, the SPP have outlined a series of bold interventions that policymakers should consider in order to dramatically boost pension saving and pull forgotten workers into the savings net.
These include but are not limited to:
Various suggestions as to how to address the fact only 4% of the self-employed are saving into a pension, from an opt-out mechanism to be administered by HMRC to a state-backed default pension scheme
A "Bronze, Silver, Gold" tiered contribution incentive. To help address the myth that current minimum Automatic Enrolment minimum savings rates (8%) are enough, the SPP suggests exploring an accredited framework where a Bronze standard sets a 12% total contribution floor (phased progressively to protect employers), a Silver standard is 15%, and an aspirational Gold standard at 20%.
The £2,880 limit (on which pension tax relief is payable for non-taxpayers) has not increased for more than a quarter of a century. The SPP suggest that increasing this might better encourage parents and grandparents to consider saving into a pension for the under 18s who are likely to be the greatest beneficiaries of investment growth.
On Collective Defined Contribution (CDC) pensions, the SPP state that, “Subject to appropriate regulatory safeguards, there is a strong case for exploring how CDC-style solutions could be made available within the retail market.” The SPP also noted that CDC could, “…easily replicate the concept of a survivor’s pension and ensure a protected income stream for the longer-lived partner” and that, “…it is possible to set up CDC schemes to operate on a unisex basis. Under this approach there would be an underlying cross-subsidy towards female members given their higher life expectancy.”
To help the 2.3m working as carers who currently receive no income, the SPP recommend that the Commission should explore the practicalities of introducing a carer’s creditIn response to the Pensions Commission’s concern about the way in which people are currently accessing their 25% tax free cash lump sum, rather than scrapping this, the SPP suggest that the government should, “…examine the advantages and disadvantages of amending the tax-regime to allow for the 25% tax-free allowance to be spread over time (e.g. applied to each monthly payment, rather than only in a one-off lump sum).”
David James, SPP’s DC Committee Chair and a member of the SPP’s Adequacy Working Group, said: “Pension adequacy is one of the most defining financial challenges of our generation. We cannot rely on an approach that has a track record of being ineffective, with over 15m people not saving enough for their retirement. We need an actionable framework that changes public psychology, supports employers, and ensures structural fairness across every generation and career path. The SPP’s response to the Pensions Commission is a helpful starting point for making such changes. ”
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