July Pensions Bulletin
Posted on:
The General Election, The King’s Speech and The Euros 2024
The election is over and the Labour Party won with a landslide majority. As the government they have put forward their pension proposals in the King’s Speech (see below) but notwithstanding its contents (and the contents of possible future legislation), the GMB will continue to campaign for improvements in occupational and state pensions as well as (amongst other things) defending the Triple Lock and seeking justice for WASPI women
The King's Speech stated that the Pensions Bill will include:
- Measures to prevent people from losing track of their pension pots through the consolidation of Defined Contribution individual deferred small pension pots. This will enable an individual's deferred small pots to be automatically brought together into one place.
- Ensuring all members are saving into pension schemes that are delivering via a Value for Money framework by introducing a standardised test that trust based Defined Contribution schemes will need to meet to demonstrate they deliver value.
- Requiring pension schemes to offer retirement products so people have a pension and not just a savings pot when they stop work
- Consolidating the Defined Benefit (DB) market through commercial Superfunds.
- Reaffirming The Pensions Ombudsman (TPO) as a competent court, removing the need for pension schemes to apply to the courts to enforce TPO decisions.
- Amending the Special Rules for End-of-Life Legislation to extend the definition of terminal illness and allow eligible members to receive a lump sum payment at an earlier stage.
What’s Missing?
The content of the King’s Speech is very general and specific legislation with greater detail is awaited. We hope that forthcoming legislation will cover the following:
Reaffirm the Triple Lock
This policy of increasing the State Pension by the highest of inflation, average earnings growth and 2.5% has been essential in protecting those on the state pension.
Support Defined Benefit (DB) and Collective Defined Contribution (CDC) Schemes over and above Defined Contribution (DC) Schemes
Defined Contribution Schemes generally give the worst pension outcomes of the 3 main methods of pension provision. They are the riskiest and assume greater pensions knowledge. DB schemes are more secure and CDC schemes offer up to 50% better outcomes according to the latest research. We want commitments to DB and CDC schemes in any forthcoming legislation. Tackling Pensioner Poverty is essential if we are to get the economy moving and these are two very easy ways of doing it.
Reduce the Gender Pensions Gap
The gender (and race & disability) pensions gap is too wide, up to 63% in some sectors. Although it is often a consequence of low pay the government must empower funds to address and reduce it.
Climate Change
In opposition the Labour Party stated that it wanted the UK to become the “green finance capital of the world” and they would require UK-regulated financial institutions, including pension funds, to “develop and implement credible transition plans” that align with the Paris Agreement’s 1.5°C goal. This is a laudable aim and we will monitor its progress and any likely impact on GMB members jobs
Changes to the pensions tax system
The Labour Party appears to have dropped its plan to bring back the Lifetime Allowance (LTA). The GMB believes the LTA should be brought back, revalorised (to around £2.7m) and increased in line with inflation each year. Otherwise the super rich will simply use its absence to avoid paying their fair share of tax.
Auto Enrolment (AE)
Auto Enrolment has brought millions more people into saving for a pension, but it can be improved. There is no reason that it should only kick in at 22 yrs and if you earn over £10,000 p.a. This discriminates against the young and part time workers. Both these barriers to entry need to be removed.
More importantly the minimum combined contribution of 8% is not enough to secure a decent pension. Experts say the contribution should be between 12% and 15%. The GMB agrees and we also agree that the employer should contribute a greater amount than the current minimum of 3%.
Additionally there must be an enhanced AE scheme for those who work in the Care Sector. If we are serious about addressing the Carer workforce ensuring an industry wide pension scheme is as good a place to start as any.
Ambulance Staff
In opposition the party stated they would look at why Ambulance Staff are not treated the same as other emergency workers and have a Pension Age of 60. We will ensure that they do.
WASPI Women
Earlier this year, the Parliamentary and Health Service Ombudsman (PHSO) found failings in how the Government had communicated changes relating to women’s State Pension Age and suggested compensation for those affected. This followed a long-running campaign by Women Against State Pension Inequality (WASPI) that was supported by the GMB. The Labour Party manifesto was silent about the WASPI women but that does not mean we will be. We will continue to press the party to address and resolve this injustice.
And finally, the Euros 2024
A recent survey by Aviva shows British people have a better understanding of the fundamentals of football than of pensions. 59% of respondents could describe the offside rule and just over a half knew what VAR stands for (Video Assistant Referee).
However, only 40% knew that the current State Pension Age (SPA) is 66, nearly two out of every five people wrongly thought that the State Pension could be accessed between age 60 and 65, and fewer than a quarter (23%) knew how much the full weekly State Pension is (it is currently £221.20).
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