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Lilley calling for compulsory opting-out from S2P

Forcing workers to opt out of the state second pension and compelling them to save is the only way to increase retirement saving, says former Tory Social Security Secretary Peter Lilley MP.

In a presentation to the conference in London last week, Lilley told delegates the 1 per cent charge cap has removed the incentive for life companies to distribute retirement products.

Lilley argued that if employees are forced to switch their state second pension contributions into employee-based or personal schemes, the fact that they have a plan of their own means they will be more inclined to make additional payments.

He would like to see all employees, or at least new entrants to the labour market, opt out of S2P and pay an equivalent sum into either an occupational or personal pension. But Lilley rules out compulsory payments above those paid into S2P.

Lilley told Money Marketing: “Persuading people to take out a pension policy is costly. By setting a 1 per cent cap on charges, the Government has removed the reward for persuasion without replacing it by compulsion. I favour requiring everyone to opt out of the unfunded state second pension and be compelled to save an equivalent sum in their own pension. Once people had their own pension, it would be easier for the savings industry to get people to pay more into their own schemes.”


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