Labour proposes auto-enrolment pension extension to cut benefit bill

29 May 14
A future Labour government would increase the number of people auto-enrolled in workplace pension schemes in a bid to cut the amount spent on old age benefits, shadow work and pensions secretary Rachel Reeves has said.

By Judith Ugwumadu | 29 May 2014 

A future Labour government would increase the number of people auto-enrolled in workplace pension schemes in a bid to cut the amount spent on old age benefits, shadow work and pensions secretary Rachel Reeves has said.

In a speech to the Resolution Foundation think-tank today, Reeves said around 1.5 million low earners had been left out of the introduction of workplace pension schemes. The current auto-enrolment scheme applies to workers over the age of 22 and earning more than £10,000, and is being rolled-out in stages, starting with larger employers.

However, Reeves said this meant a chance was being lost to give more people the chance to save for their future, as well as reducing future benefit payments.

‘Someone just below the auto-enrolment threshold with annual earnings of just under £10,000 would be missing out on £338 going into their pension every year, half of which would be contributed by employers and the government,’ she said.

‘Over a full working life, even if they remained at that low level of earnings, that could deliver a pension pot of around £19,000 - an extremely useful capital sum for those who may not have much in the way of other resources.

‘And of course the cost of not saving also falls on future taxpayers in terms of reliance on means tested benefits. If we want to build an inclusive system of pensions provision that supports saving and rewards contribution for all working people and helps to lift more people off reliance on means-tested benefits in old age.’

However, pensions minister Steve Webb said the proposals to expand auto-enrolment would ‘bring the whole scheme into disrepute’. It had already opened up workplace pensions for more than 3 million workers since it began in October 2012, he said.

‘Anyone earning over £5,800 can still opt into a workplace pension if they wish – but for many people on the lowest incomes it will not be the right option for them. Automatically enrolling such people when we when that to be the case would be totally irresponsible and make no sense.’

Webb added the new single-tier State Pension, being introduced from 2016, will see everyone who has worked and paid all their National Insurance contributions receive a guaranteed weekly payment set above the means test.

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