The ACA’s 7-point Manifesto calls for:
1. ACA calls for a fresh boost to auto-enrolment (AE), including increasing minimum AE contribution rates and widening coverage during the next Parliament: The Party manifestos should set out their plans to build on minimum AE contribution rates over the next Parliament. The present 8% of qualifying earnings (which equates to closer to 4% of earnings for those on lower incomes) is inadequate to provide for a sufficient income in later life. The ACA wants to see minimum AE contributions increase to 12% of total earnings over the period (and then to 16% by around 2030), with costs shared between employers and employees. The earnings threshold (which currently stops millions being signed up for AE) must also be removed and the scheme needs to be adapted to include the self-employed and those engaged in the ‘gig economy’.
2. ACA calls for an extension of pension freedoms to younger savers (subject to appropriate safeguards and incentives) to promote intergenerational fairness: To provide greater incentives for higher levels of pension savings by younger employees, the Party manifestos should include an extension in pension freedoms allowing early access after 10 years of savings to a proportion of individuals’ pension funds currently available only from age 55, for example to help fund house deposits and/or to meet a short and specific list of other eventualities.
3. ACA calls for significant simplification of the pension tax regime, with clear policy goals and extensive consultations to minimise unintended consequences: The Party manifestos should be clear on the key direction of any further pension tax reforms they propose, given the considerable personal financial implications for public and private sector employees (in both DB and DC schemes). We strongly urge that any measures are for the long term, properly thought through, and involve widespread consultations, so that best endeavours are made to smooth out the problems which have resulted from tweaks made in the regime in recent years. We accept that there are challenges especially if the policy is that changes are overall to be fiscally neutral (noting that only part of the published “cost of relief” relates to future accrual).
4. ACA calls for legislation to facilitate the wider simplification of DB schemes, with GMP equalisation/conversion providing the perfect catalyst: Subject to certification, defined benefit schemes should be able to simplify their benefit structures to improve member understanding of their benefits, but also with the potential to materially reduce ongoing scheme administration costs, facilitate more efficient hedging, and attract potentially more attractive buy-out options, improving benefit security. This simplification would make it easier for defined benefit schemes to include data in pension dashboards and help members to better understand the total value of their benefits. It should complement the largely cross-party agreed reforms that we hope will be included in a re-introduced Pension Schemes Bill in the new Parliament, encompassing a workable new DB Funding Code and appropriate and proportionate TPR powers – as well as guidance and legislation to deal with GMP equalisation and the conversion option.
5. ACA calls for a long overdue intergenerational commitment to a better social care regime: Successive Governments have avoided taking decisions to address the cost of supporting social care for the elderly, and as a result this is seriously impacting on NHS resources/performance and stretching many elderly individuals’ and local authority budgets. We believe that a longer-term approach requires a range of solutions to suit different age groups and we look to the Parties to outline a comprehensive social care package that encompasses ideas such as some extra taxpayer funded spending; initiatives such as tax-free social care vouchers for those supporting older relatives in care; and consideration of a social insurance scheme that might help younger people better to plan ahead than the present older generations. Such an approach needs to be part of the integrated savings, pensions and elderly care policy for life.
6. ACA calls for State Pension sustainability with replacement of the ‘triple lock’: We believe the ‘triple-lock’ should be retained only until 2021 as this widens intergenerational differences in the indexation of benefits. From 2021, we recommended that the State Pension should be increased either in line with earnings or be set annually as part of the welfare state components of the Budget, taking into consideration a number of factors (including changes in earnings and prices, and pensioners’ income and consumption needs in general).
7. ACA calls for clarity over the State Pension Age, to help people plan for their retirement/later life’: The Party manifestos and incoming Government should confirm that the State Pension Age will increase to age 68 over the period 2037-2039 as recommended by the Independent Review of State Pension Age. This policy reflects both the extension in working lives in recent years and lengthening lifespans that have not been reflected adequately in SPA increases to date.
ACA Chair, Jenny Condron, commented: “The public have a right to expect transparency from their politicians in what they are planning in respect of policies towards savings, pensions and social care – without this, how can anyone plan their finances for the longer-term?
“We need our politicians to approach these matters with a view to seeking some greater stability and long-term thinking over the various pensions, savings, social care and tax regimes and – ideally – with a desire to identify some consensus across the Parties akin to that enjoyed in respect of the pensions auto-enrolment policy over the last decade.
“After all, politicians of all Parties are shrill in their demands that the savings and pensions industry is ever more transparent in its dealings with the public. So, let’s have clarity and vision in this year’s Party manifestos. They should broadly map out key plans for savings, pensions and social care for the next Parliament and beyond – it’s simply not right if changes of approach and tough decisions are hidden away in the long grass. This just leads to the public growing ever more disillusioned when the policy rabbits appear out of the hat post-General Election”.
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