‘We need a consensus’: Sir Stephen Timms calls for higher contributions

Sir Stephen Timms, the Labour MP for East Ham, said he understood that the government had been reluctant to raise contributions during the cost-of-living crisis, but argued that action was needed soon to improve pension adequacy.

“I completely understand that the recent cost-of-living crisis hasn’t been a period in which the government has felt they could announce an increase in pension contributions, but we really do have to do that, I think, soon after the forthcoming election,” he said.

“I hope that will enable us to make the progress that’s needed. Otherwise, we are heading into some very, very difficult problems in 10, 15 or 20 years’ time.”

Sir Stephen was talking to Darren Philp and Nico Aspinall, co-hosts of the V-FM podcast, at a live recording at the Pensions Expert DC Strategic Summit on Tuesday.

He said he was “persuaded by the industry consensus” that there was a need to increase contributions to at least 12% of pay, split equally between employer and employee contributions.

“We need to be in that position by the early 2030s,” Sir Stephen continued. “I think what is needed is the publication of a plan so that everybody knows where we’re going.

“If they can see that in a plan over a decade or so, then it will be possible to deliver it without too much difficulty. But people do need to know where we’re going. At the moment, people haven’t got a clue, and that really does need to be to be fixed.

“I’m disappointed we haven’t been able to make a bit of headway on that in the last couple of years.”

Need for consensus

Asked by a delegate about the importance of trade union support for higher contributions, Sir Stephen agreed on a need for “consensus across the whole of society”.

“First of all, set out a plan for how we’re going to get to where we need to reach over the next decade or so, and then build a consensus around it,” he said.

“Trade unions will certainly be a very important part of that, and an incoming Labour government – if that’s what we’re going to get – will be in a good position to work with the trade unions.

“But we desperately need employers to be on board as well. Employer support has been a big part of the reason for the success of auto-enrolment.”

Sir Stephen also voiced caution on the discussions over the ‘lifetime provider’ model, proposed by Jeremy Hunt, the chancellor, last year. He warned that the move could risk unwinding the employer support for pensions, and highlighted the need to build on it rather than put it at risk.

A new Pensions Commission?

The Work and Pensions Select Committee chair was also asked about the idea of a new Pensions Commission. Over recent months there have been several calls for a new independent commission to review the many consultations and policies currently in place and potentially plot a path towards higher auto-enrolment contributions.

However, Sir Stephen said his committee had decided not to put its weight behind calls for a new pensions commission as it wanted to focus on building on what was already in place, rather than “tear up everything that we’ve done” and start afresh.

“One thing that we’ve called for in the committee is what we call an ‘Office for Pensions Responsibility’,” he said. “We think there is a really important job to be done just looking at the evidence, looking at the extent of pension saving, the trade-offs that we’re going to have to decide on between levels of pension contribution and other income, and just help to build that consensus by getting all of that evidence out into the public domain, letting people see it and draw their own conclusions.

“Something along those lines would certainly help, but it’s a bit different from the Pension Commission, which did a fabulous job for us.”

The full interview with Sir Stephen Timms is available now via the V-FM podcast.

More information about the Pensions Expert DC Strategic Summit is available from the dedicated event website.

Further reading

WTW urges higher default contribution levels to boost saving (29 April 2024)

Pot for life could threaten auto-enrolment success, warns ABI (2 April 2024)

Calls grow for long-term savings commission (13 February 2024)

The economic impact of higher contributions (12 February 2024)