Employers which do not offer pensions for their employees should be forced to pay pension contributions into any stakeholder scheme nominated by a member of staff, according to the Association of British Insurers (ABI).
And employees should be automatically included in their company pension schemes, subject to individuals having the right to opt-out, the ABI said.
The recommendations, which come ahead of the autumn report of the government’s Pensions Commission, form part of Serious About Saving, the ABI agenda for action on pension reform.
Speaking at the launch of the report, Stephen Haddrill, director-general of the ABI, said: “Our research has shown that, with contributions from both employer and employee at the relatively modest rate of 3%, overall savings would rise by £4.2bn a year.”
The ABI also proposed the introduction of a new initiative called the Pension Contribution Tax Credit.
This would give employers a refund of their National Insurance payments, provided they make a set level of contribution to employees’ pensions and that at least two-thirds of their workforce are members of the company pension scheme.
This proposal would increase saving by about £1.5bn, at a cost to government of £500m to £700m, the ABI said.
Serious about Saving contains 14 key points that the ABI believes should provide the basis for comprehensive reform of the pensions system.
- Improve eligibility for the basic state pension
- Reform the State Second Pension
- Simplify and promote contracting-out
- Bring self-employed people into the State Second Pension
- Drive auto-enrolment hard and legislate if necessary
- Give employers strong fiscal incentives to contribute to pensions
- Make pension transfers easier
- Promote the savings message consistently and improve understanding of tax relief for individuals
- Create incentives for employers to provide financial advice for their employees
- Introduce more flexible annuity rules and products
- Provide better information on pensions for customers and continue to reduce costs where possible
- Reform the way in which financial advice is paid for
- Reform the new system of Basic Advice
- Take action to boost customer confidence in long-term savings