Rachel Reeves is being urged to lower the pension pot starting age from 22 to 18 and scrap the £6,240 earnings threshold. Pension Bee has issued the warning to UK households ahead of the Labour Party government’s Budget.
Lisa Picardo, the chief business Officer UK at PensionBee, described these changes as “long-overdue” and crucial for expanding pension saving to millions more workers. Ms Picardo explained: “(This change) would give millions more workers access to pension saving from day one, expanding the reach, narrowing pension saving gaps and supporting better engagement.
“Contributions made earlier in working life can be the most valuable because of compound growth. These simple, long-overdue changes could help transform the nation’s retirement savings and must be implemented without further delay.”
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She warned: “The current minimum contribution amount of 8% will not be enough for most people to fund a moderate living standard in retirement. Raising the level of contributions is key to ensuring savers have enough for later life.”
Lisa also requested the Chancellor to introduce legislation to ensure transferring a pension between providers won’t take longer than 10 days. This could end the transfer delays currently pestering the industry as some people wait months for their funds to be moved and accessible again.
Finally, one proposal many experts are putting to the Chancellor is keeping the 25% pension lump sum withdrawal tax-free. She said: “Savers already face shifting tax rules and reducing this key retirement benefit would only add more uncertainty, making it harder for people to plan with confidence.
“The government must commit to keeping the current allowance in place, giving savers the stability they need to build and plan for a secure future, without the fear of sudden policy changes moving the goalposts.”
Lisa also warned over a big discrepancy, as higher income earners are getting up to 45% tax relief while base rate taxpayers are only getting 20%. The PensionBee expert proposed making a universal tax relief rate of 30%.
This would allow low-income savers to build up their funds quicker and incentivise their pension contributions even more.
