His stealth tax grab sucked more than £200billion (and counting) out of our pensions and destroyed the nation’s final salary pension schemes by making them too expensive. Yet is far from the only pensions policy disaster.
Two million fell victim to the pensions mis-selling scandal, when greedy salesman advised members of defined benefit final salary workplace schemes to switch into riskier personal pensions, and gobbled up commission on the deal.
This was quickly followed by the mis-selling of pension top-ups known as freestanding additional voluntary contributions, or FSAVCs.
The UK’s pensions hall of shame includes Equitable Life, Robert Maxwell, Sir Philip Green and the British Steel Pension Scheme scandal.
The state pension is hardly immune either, with almost four million 1950s ‘Waspi’ women left feeling cheated after their retirement age was hiked from 60 to 65.
Waspi stands for women against state pension injustice and the women affected aren’t the only ones feeling shortchanged by the Department for Work and Pensions.
Last week, the DWP identified another £500million of state pension underpayments, but that is only a small part of the anticipated total of nearly £3billion. The DWP will pay compensation for its error but the National Audit Office reckons around 40,000 have already died without receiving anything.
The state pension triple lock has lifted millions of pensioners out of poverty since 2011 but it remains under constant attack from politicians who say the mechanism is unaffordable.
Amid corruption, maladministration, Treasury greed and DWP incompetence, there is one exception to decades of pension misrule. Almost everybody agrees that the workplace auto-enrolment pension scheme has been a success.
We should cherish it.
From October 2012, businesses were required by law to automatically enrol all eligible workers into a workplace pension and contribute to it.
Auto-enrolment has given 12 million mostly lower paid workers a company pension for the first time, with the numbers opting out surprisingly low at around one in 10.
Originally, it was restricted to those aged 22 or over earning more than £10,000 a year. This excluded younger workers and part-timers, many of them women.
Also, the first £6,240 of earnings did not qualify for employer contributions or tax relief, again, hitting lower earners disproportionately.
In September, these rules were scrapped and although the changes may take a few years to roll through, they are a huge step forward, according to former Pensions Minister turned campaigner Ros Altmann.
They mean 18-year-olds must be enrolled too, bringing another 600,000 younger workers into the scheme. Better still, the first £1 earned will attract full employer contributions and tax relief, rather than earnings above £6,240.
Someone earning £10,000 will get £800 in their pension as a result, up from £300. “This will help lower earners and women who lose out so much in the gender pensions gap,” Altmann said.
This could boost a 40-year-old’s retirement fund by £31,300 while younger workers should do even better. A 22-year-old’s retirement fund should be £93,400 higher by the time they retire, figures from Aegon show.
Altmann called for the new proposed minimum age of 18 to be scrapped, too. “Why should 16 and 17-year olds be excluded?”
In his last month’s Autumn Statement, Chancellor Jeremy Hunt vowed to further develop the scheme by allowing workers to have a single workplace pension “pot for life”, allowing them to consolidate all their schemes into one to avoid losing track of them.
READ MORE: DWP identifies almost £500million in state pension underpayments
A staggering £64.3billion went into employee pensions in 2022. Employers contributed £38.6billion, workers added £18.3billion while tax relief on those contributions totalled £7.4 billion, DWP figures show.
Damon Hopkins, head of DC workplace savings at pensions specialists Broadstone, said the figures show just how valuable auto-enrolment is and urged workers to resist the temptation to opt out, even if money is tight. “A workplace pension is perhaps the closest to free money that savers can get.”
The cost-of-living crisis has left its mark, with contributions down on both 2020 and 2021, Hopkins added. “Fears of mass op-outs have not materialised but contribution rates have at best flatlined and, at worst, are now in reverse.”
Another major worry is that almost 4.2 million self-employed workers do not have access to auto-enrolment, and are falling far behind in the pensions stakes.
Latest HMRC figures show the number of self-employed people contributing to a personal pension increased in the 2021/22 tax year, but only by 10,000 to 340,000. That is less than one in 10 of the self-employed total.
The final concern is that the success of auto-enrolment could breed complacency in beneficiaries. As we live longer, the money saved may still not be enough to secure a comfortable retirement and people need to save under their own steam, too. And we still need a strong state pension.
