Pensions minister Steve Webb says the Government should look at strategies to increase pension contribution levels, such as Save More Tomorrow, once the current auto-enrolment reforms have bedded in.
At a fringe event at the LibDem conference in Birmingham this week, Webb said the Government would be looking at ways of ensuring people do not see the 8 per cent contribution as a ceiling. He said: “There is a scheme in America called ’Save More Tomorrow’, where you get people to commit today that tomorrow, when they earn more money, they will put some into their pension. There is evidence that works quite well, it is less of a commitment. There are a lot of innovative ways to get people beyond 8 per cent but the second we start saying it is not enough, they will say, why bother then, so let’s get them in first.”
Standard Life chief executive David Nish said: “We have to view auto-enrolment as the first stage. As an individual gets wage increases, how do you encourage a higher savings rate? One of the things we have looked at is auto-escalation.”
Asked if he would ever consider making saving into a pension compulsory, Webb said he shies away from the idea because pensions are not right for everyone. He added that although people say compulsion works in Australia, the labour market is very different.
He said: “In Australia when contribution rates went up by 3 per cent across the board, unions collectively said we will give up 3 per cent of pay rises for 3 per cent of contributions. I do not see the analogy with the UK in that set-up.”
Saga chief executive Ros Altmann said : “It is unlikely that compulsion will be widely accepted apart from as some kind of tax, and tax has an even worse name than pensions.”
LibDem conference talking points
- Treasury chief secretary Danny Alexander says a team of 2,250tax inspectors is being recruited to crack down on tax avoidance among 350,000 of the country’s wealthiest people.
- Alexander says the LibDems have an “aspiration” to raise the income tax threshold to £12,500, after reaching the coalition agreement goal of £10,000.
- Business Secretary Vince Cable is proposing a clampdown on executive pay through a range of measures including a shareholder veto and the ability to claw back parts of executive pay packages.
- Lord Newby and the LibDem thinktank Centre Forum are proposing reform of IHT, including an increase in the minimum length of time for gifts to be IHT-exempt from seven to 15 years.
- LibDem MEP Sharon Bowles warned current European regulatory reforms would lead to “a crisis of capitalism”.