Since the 1980s, we’ve had just one undisputed pensions success story. Chancellor Rachel Reeves will now sink that with a £15billion tax raid in next Wednesday’s Autumn Budget.
Millions of workers will pay the price in lower pensions and incomes, for decades to come.
These are the very “working people” Reeves and PM Keir Starmer claim to be protecting. Instead, they’re launching a shocking assault on their workplace pensions.
Just about everything that could have gone wrong with pensions policy over the last five decades has.
In the 1980s, Tory PM Margaret Thatcher encouraged employees to transfer from generous occupational pensions into personal pensions, in a bid to make the workforce more mobile.
This triggered the £11billion pensions mis-selling scandal as commission-hungry advisers urged two million workers to switch into inferior personal pensions, blighting retirements.
There was an even bigger scandal in 1997, when new Labour chancellor Gordon Brown launched a £200billion pensions stealth tax raid.
This wiped out almost every private sector final salary scheme in the UK. Today, only public sector workers get gold-plated pensions, which pay a guaranteed income based on service and salary.
Private sector pensions are a gamble on the stock market. Thanks to Brown.
I could add a host of pension scandals to that list, including Maxwell pensioners, Equitable Life, British Steel, widows’ pensions and the Waspi debacle.
Personally, I think the jury is still out on 2015 pension freedom reforms, too. But there has been one big success.
The workplace pensions auto-enrolment scheme.
Launched in 2012, auto-enrolment was designed to give up to 10million mostly lower-paid workers a company pension for the first time.
And that’s exactly what it’s done. It’s been a roaring success. It’s not perfect and needs to be built on, but instead Rachel Reeves is bringing out the wrecking ball.
Under auto-enrolment, employers are obliged to enrol every eligible staff member onto a pension.
Employers have to contribute 3% of staff earnings, tax relief adds 1% and workers pay in 4%.
The total contribution is 8% of income. That’s not enough to guarantee a comfortable retirement, but it’s a brilliant start.
It should be untouchable.
Auto-enrolment was set up with cross-party support. Now Labour is gunning for it. Something else Starmer didn’t warn us about in the general election.
It’s a pensions scandal happening before our very eyes and must be stopped.
Reeves and Starmer are looking to charge national insurance on employers’ pension contributions. Labour has always treated private sector pensions as a cash cow, but this is a brazen and dishonest assault.
The impact will be huge.
Companies will recoup the cost by employing fewer workers, capping future wage hikes and only paying the bare 3% minimum into pensions.
Former Labour cabinet minister David Blunkett has warned it could lead to “rotten pensions” for millions, and he’s not the only one.
Former pensions minister Ros Altmann has also blasted this “serious mistake”. As has another former pensions minister, Steve Webb.
We’ve had just one pensions policy success in half a century. And Reeves will smash it in just three months. Millions will be paying the price long after Reeves and Labour have been turfed out of office.
