Progress on pensions has stalled since the introduction of auto-enrolment, shadow work and pensions secretary Liz Kendall has said, and promised to “finish the job” if Labour gets into power.

Labour would progress pension reform, Kendall said speaking at the Trades Union Congress pensions conference on Wednesday, accusing the Conservative government of having stalled on this. 

“My personal mission is to finish the job, building on the legacy of great Labour women and trade unionists who have come before me,” she said, citing Labour peers Barbara Castle, Patricia Hollis and Jeannie Drake.  

The MP for Leicester West pointed to her party's plan for a pensions review, saying this would be across the entire sector and include defined benefit, defined contribution and public sector pensions. 
 

 

Depending on what is proposed, the inclusion of public service pensions in a review could put Labour on a collision course with its union base. Public sector workers were promised there would be no change to protected elements for 25 years when their pensions were moved to career average, and unions are unlikely to easily accept changes that could leave members worse off, as illustrated by the British Medical Association's campaign on pensions tax.

It appears however that Labour's review would be focussed mainly or entirely on investments. Kendall said it would set out proposals “to ensure savers get the best possible returns and identify the barriers to pension funds investing more into UK productive assets”.  

In a preceding speech, TUC assistant general secretary Kate Bell had said the TUC wants any future government to set up a new pensions commission, raise minimum employer contributions and drop a planned state pension age increase to 67 among others, but Kendall did not say if Labour would follow through on these ideas.  

Kendall pledged to be on the side of pensioners and attacked the government’s record, citing figures by thinktank the Resolution Foundation which found the tax plans outlined by chancellor Jeremy Hunt in the Spring Budget would leave 8m pensioner taxpayers an average of £1,000 a year worse off. 

The freezing of tax thresholds until April 2028 means as pensions income increases, more pensioners become taxpayers or are pulled into higher tax bands, along with the working age population. In addition, a recent cut in national insurance does not benefit non-working people as they do not pay national insurance. Despite this, the Institute for Fiscal Studies has shown that pensioners will still pay less tax than someone receiving the same amount from earnings. It also pointed out that benefits have risen faster for pensioners than for working age people.  

Kendall argued pensioners have become worse off under the current government: “The Tories’ economic failure has meant more over-55s needing to take their pension early. More pensioners renting on their savings to get by and more older people renting into retirement." 

Figures by the Department for Work and Pensions show an uptick in pensioners living on a relative low income, after a period of improvement in pensioner incomes between 2000 and 2013. Compared with the overall UK population, pensioners have been less likely to be in relative or absolute low income after housing costs since around 2005, and at similar levels before housing costs since around 2010, according to the DWP, partly because three-quarters of pensioners own their home outright, compared with one-quarter of working-age people. 

However, the proportion of people renting in retirement is expected to increase as fewer people will be able to ever buy a home, after a housing shortage and a long period of low interest rates have sent UK property prices spiralling. 

Kendall also warned against abolishing NICs as suggested by the government, saying it was not clear what this would mean for eligibility for the state pension. 

“Will your £46bn plan to scrap national insurance contributions be paid for by higher taxes… including from Britain’s 8m pensioner taxpayers?” she said. 

If the plan was to merge NICs and income tax, she called on the government to “spell out to pensioners what this will mean for their tax bill, including the taxes they pay on savings”. 

Labour claimed on Wednesday that merging NICs and income tax would mean the average pensioner facing a £800 tax rise, “more than wiping out gains from the triple lock over the last 14 years". 

What should a Labour government focus on in pensions?