The chancellor is being urged to mimic Dutch-style pensions as a leading body warns that millions of savers in the UK face a retirement crisis.
The Society of Pension Professionals (SPP), a trade body that represents consultants, actuaries and lawyers, has set out a series of recommendations for the government’s pensions commission.
It argues that workers and employers need to pay more into pensions and that Britain could take inspiration from the Netherlands, where participation in workplace schemes is near-universal and contributions are far higher.
Dutch workers and employers pay a combined average of 18.6 per cent of salary, two thirds coming from employers. The minimum auto-enrolment contribution in Britain is 8 per cent — 5 per cent from the employee and 3 per cent from the employer.
The SPP said the commission should consider making higher contribution rates mandatory in some sectors.
The Netherlands is about to embark on one of the biggest pension overhauls in European history. The system has previously focused on defined benefit schemes, which guarantee a set income in retirement. However, from January, nearly 11 million workers will move to a defined contribution model, where retirement income depends on the amount saved and how investments perform.
The transition will affect some 18.6 million pension pots by 2028 and is expected to reshape European financial markets, with Dutch funds reducing holdings of government bonds in favour of riskier assets that should yield higher returns.
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Rachel Reeves, the chancellor, has pensions in her sights as she scrambles to plug the multibillion-pound hole in the public finances. Treasury officials are said to be considering cutting the tax-free pension lump sum, which allows savers to withdraw 25 per cent of their pot (up to a limit of £268,275) without paying tax.
The SPP’s report, Saving Retirement: Who is at Risk and Why?, argues that Britain faces urgent challenges. Government figures show that 15 million people are not saving enough for retirement, with women, carers and the self-employed among the groups most at risk. The SPP has proposed a package of measures, including a “carers’ credit” for the 2.3 million unpaid carers who have no income and are unable to build up pension rights.
Other recommendations include extending automatic enrolment to self-employed workers, removing the rigid link between employer and employee contributions, so that employees could reduce their own contributions while employers maintain theirs, and offering additional tax relief to firms that contribute at least 12 per cent of salaries into pension schemes.
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Sophia Singleton, the president of the SPP, said the proposals were designed to stimulate debate and give guidance to the pensions commission. She said: “Government, industry and savers can all do more, and we all need to if we are to achieve the shared goal of an adequate retirement income for all.”
The commission, which was revived last month to confront what ministers have described as “the UK’s retirement crisis”, is expected to report next year. While previous reforms expanded auto-enrolment to cover more workers, campaigners argue that contribution levels are still too low to ensure financial security in later life.