Labour willing to work with govt on AE reform; will vote against charge cap changes without ‘strong evidence’

Shadow Pensions Secretary, Jonathan Ashworth, has stated that the Labour Party is willing to work with the government on auto-enrolment reforms if they are introduced in the next session of parliament, but warned it would vote against proposed changes to the charge cap without a “strong evidence base for change”.

Speaking at the Trades Union Congress (TUC) Pensions Conference 2022, Ashworth said that the party was proud of auto-enrolment’s success so far, but that the policy needed to “go further”.

“We want more people to build up meaningful pension pots to provide financial security in retirement, including low earners, younger workers and the self-employed,” he said.

“The government’s own ambition is to meet these targets by the mid-2020s. I want to say very directly to ministers, if they bring forward the legislation in the next session of parliament, we will work constructively with them on the passage of that legislation. Because for me, the principle that pension reform should proceed on the basis of long-term consensus is really important.”

However, he noted that he was worried that the consensus on pension policy was breaking down.

Commenting on the government’s proposals to remove performance fees from the 0.75 per cent charge cap on automatic enrolment defined contribution (DC) pension schemes’ default arrangements, Ashworth warned that the changes could undermine member protections.

“The reason the cap was introduced was to address those inefficiencies in the market and to protect the saver in return for harnessing the inertia of the millions of people enrolled into private savings,” he continued.

“Now the Chancellor, with big promises to big infrastructure projects, eyes a piggy bank, but this way of funding infrastructure projects will turn out to be another payday for the fund management industry. The question I have is: Why do Tory ministers think changing the cap is necessary?

“We will have no hesitation in voting against the regulations without a strong evidence base for change.”

Responding to the comments, a DWP spokesperson said: “We want pension schemes to have access to a wide range of investment options so they can deliver the best possible outcomes for the record number of Brits now saving for retirement. This includes making it easier for schemes to invest in illiquid assets, where trustees deem these in members’ best interests.

“Any changes we propose to the charge cap will – first and foremost – be designed to ensure members are sufficiently protected, balancing the potential benefits to members with the costs of paying higher fees.”

During his session at the conference, Ashworth also addressed the issue of an ageing population and longevity.

He noted that although longer life spans should be “cause for great celebration”, there was a “deep inequality” that cannot be ignored.

“Although some are living longer, overall life expectancy is stalling and for the very poorest, life expectancy has gone backwards,” he stated.

“Without action, I believe the risk of pensioner poverty in retirement for today’s younger and middle-aged adults is clear.

“I’m announcing today that the next Labour government will have a strategy for ageing. I want to start a conversation with the TUC, pensions experts and with society about the building blocks of that strategy to make Britain the best country to grow old in.”

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