← Back to Westminster Hall Debates
Saving for Later Life
07 February 2023
Lead MP
Stephen Timms
East Ham
Lab
Responding Minister
Laura Trott
Tags
EmploymentBenefits & Welfare
Word Count: 14181
Other Contributors: 9
At a Glance
Stephen Timms raised concerns about saving for later life in Westminster Hall. A government minister responded.
Key Requests to Government:
The Government should consult on a plan to deal with the issue of inadequate pension savings, aiming to raise minimum contributions from 8% to 12%. Legislation is needed this year for implementing the 2017 review recommendations by the mid-2020s. The Minister should also work towards identifying an adequate retirement income and start laying the ground for sufficient saving to deliver it.
How the Debate Unfolded
MPs spoke in turn to share their views and ask questions. Here's what each person said:
Lead Contributor
Auto-enrolment has been successful in increasing workplace pension saving but there are significant challenges: people are not saving enough for adequate retirement incomes, and those outside the scope of auto-enrolment due to low pay or self-employment would benefit from pension savings. Only 39% of households are on track for an adequate pension according to the Pensions Commission definition, with nearly 20% heading towards poverty in retirement. The problem is particularly severe for people in their 40s and above who lack defined benefit pensions and have not had time to build up auto-enrolment savings.
David Linden
SNP
Glasgow East
He expressed appreciation for his colleague's intervention and raised questions about the cross-Government approach needed to explore issues related to later-life saving comprehensively. Discussed the need for wider eligibility criteria in automatic enrolment, moving from age 22 to 16 and including self-employed workers. Raised concerns over pensioner poverty, highlighting that many struggle with basic living expenses due to inadequate state pensions. Linden agreed with the case for automatic enrolment into Pension Wise appointments and highlighted its importance in providing guidance to pensioners.
Duncan Baker
Con
North Norfolk
Mr Duncan Baker highlighted the issue of lower-paid individuals not engaging with pension schemes, suggesting that people often avoid dealing with pensions due to fear and a lack of understanding. He mentioned new DWP research indicating detachment, fear, and complacency as barriers to engagement. Emphasising the importance of guidance before retirement, he advocated for better promotion of the Pension Wise service, which offers free advice but has limited awareness among the general public. Baker echoed Mills' support for automatic enrolment into Pension Wise appointments, emphasizing the need to promote the service more effectively.
Gareth Davies
Con
Grantham and Bourne
The hon. Member discussed New Zealand's KiwiSaver scheme as an example of a model that combines pension savings with assistance for home ownership, questioning whether the UK should adopt similar measures. There has been no discussion about the diversity of investments in pension funds. The UK ranks low in investment in illiquid assets such as private equity, venture capital, and infrastructure.
Gregory Campbell
DUP
East Londonderry
Commends the debate's timeliness, noting that while the Government maintained the triple lock on state pension contributions and entitlements, it will face increasing pressure in the future.
Jim Shannon
DUP
Strangford
Agrees with starting early on financial literacy education for young people, citing Deloitte's survey which shows that younger individuals lack knowledge about ISAs and savings. Proposes incorporating these matters into learning modules in schools. The hon. Member raised concerns about part-time workers who have not paid full national insurance contributions and thus will not receive the expected pension upon reaching retirement age.
Kevin Foster
Con
Torbay
Welcomed the success of auto-enrolment in increasing pension participation and highlighted challenges for self-employed individuals. Raised concerns about using national insurance payments as a quasi-auto-enrolment mechanism and suggested working with sector groups to reach out to under-saving sectors.
Questions whether the work being done to create a dashboard allowing people to access information about their private pensions is beneficial, highlighting the complexity of understanding multiple pension schemes. Discusses her private Member's Bill addressing sex-based inequality in pensions, emphasizing the need for further work to address pension contribution disparities between men and women due to income differences. She cited research indicating that only 25% of people from ethnic minority backgrounds have workplace pensions, suggesting the Government should increase educational efforts to ensure these groups understand their post-retirement financial security options.
Matt Rodda
Lab
Reading Central
People who work hard and save all their lives deserve a decent income in retirement. The cost of living crisis has a significant impact on households, with food prices, fuel prices rising dramatically, forcing some to stop saving or dip into pension savings unsustainably. Matt Rodda highlighted the economic mismanagement by the Government leading to low growth and high inflation. He also noted that many savers are not on track for their retirement expectations, citing a 75% increase in online searches for scam help and an average loss of £82,000 per person from pension scams. Pension funds face considerable obstacles when investing in illiquid assets due to issues like electricity connectivity delays. There is a need for work across Government to address these challenges. Access to high-quality advice is crucial for people with modest pension pots, as they are financially vulnerable and may take early retirement decisions that are not in their best long-term interests.
Nigel Mills
Con
Amber Valley
Pension debates are bit like buses: we have had none for ages, and now we have had three in the last four sitting days. Around 28% of employees are still in defined benefit schemes, mainly in the public sector, with some 87% getting an employer contribution of over 12% of their pay; however, only 9% receive a similar level from employers for those in defined contribution schemes. The situation is even worse for self-employed people, with only 16% saving anything like a material amount in a pension. To clarify, the idea was to allow self-employed individuals to put their lower national insurance rate into a pension pot and top it up, or pay at the same level as employed individuals without getting any benefit from it. This aimed to replicate auto-enrolment where an individual contributes money and gets matching contributions from the taxpayer. Suggested setting a target for self-employed people regularly saving into pension schemes by a certain date, aiming for an improvement from 16% to 48%. Mills supported the case for automatic enrolment into Pension Wise appointments, noting that while it is a good service, take-up remains low. He suggested trying out this approach to boost engagement and improve guidance provision.
Government Response
Laura Trott
Government Response
It is a pleasure to serve under your chairmanship, Mr Hosie. I thank the Work and Pensions Committee for its report and the important role that it plays in scrutinising the work of the Department. The pensions landscape has undergone substantial change with new state pension, increased pension saving through automatic enrolment (AE), and increased choice through pensions freedoms backed by free guidance. AE has got 10.8 million more people into saving for retirement, but responsibility is now on individuals rather than employers. The Government will implement the outcomes of the 2017 review, including reducing auto-enrolment age from 21 to 18 and removing the lower earnings limit. They are also looking at measures to close the gender pensions gap by monitoring contribution rates regularly. For self-employed people, the Minister wants to better understand touchpoints through which they engage with the Government and is exploring tech-based nudges and retirement savings solutions within financial platforms to encourage them to save for their retirement. The Department will continue working on gig economy workers' eligibility for AE and collective defined contribution schemes. Simple annual statements, midlife MOT, and pensions dashboard are introduced to make pensions more understandable to savers and empower them. The Minister committed to evaluating the impact of proposed mechanisms and ensuring pension-maximising returns on savings.
▸
Assessment & feedback
Summary accuracy
About Westminster Hall Debates
Westminster Hall debates are a chance for MPs to raise important issues affecting their constituents and get a response from a government minister. Unlike Prime Minister's Questions, these debates are more in-depth and collaborative. The MP who secured the debate speaks first, other MPs can contribute, and a minister responds with the government's position.