Compulsory Workplace Pensions

The core idea

Retirement saving as part of every job

Manifesto 1.1 proposes that every person in employment should build a workplace pension. The model would replace today’s opt-out structure with compulsory participation, so that every job includes retirement saving from the beginning.

Each employee would make a statutory contribution. The employer would match it, and government would provide tax relief equal to 25% of the employee contribution. The required contribution rate would rise gradually rather than being imposed at its final level immediately.

The aim is to create funded retirement provision throughout working life, reduce long-term dependence on the State Pension and support Policy 32’s proposed minimum retirement-income safety net.

Shared responsibility

The three-way contribution

System reform

From automatic enrolment to universal participation

The current UK system requires employers to provide a workplace pension and automatically enrol many workers. However, eligibility thresholds and exemptions apply, and an enrolled worker can normally opt out.

Proposal 28 would go further: every person in employment would participate, with no routine opt-out from the statutory minimum.

How it would work

Building a pension through employment

1. Employment begins The employer registers the worker and pension arrangement from the first eligible pay period.
2. Employee contribution A statutory share of pensionable pay is deducted through payroll.
3. Employer match The employer contributes an equal amount under the proposed matching rule.
4. Government relief Government adds support equal to 25% of the employee contribution.
5. One continuing record The worker retains a clear, portable pension record when changing jobs.

Illustrative only: employee pays £40 + employer pays £40 + government adds £10 = £90 invested.

Protection and implementation

Safeguards for a compulsory system

Compulsion creates responsibilities for government, employers, pension providers and regulators. A statutory minimum must be affordable, transparent and protected from excessive charges, poor administration and unsuitable investment.

The wider settlement

Relationship with Policy 32

Public scrutiny

Questions that must be answered

The policy should be developed with workers, employers, trade unions, pension providers, actuaries, consumer groups, the self-employed, payroll specialists, tax experts and organisations representing people on low and unstable incomes.

1. What statutory employee contribution should apply at launch, and what final rate should the system target?
2. Should employer matching apply from the first pound earned, or should any lower earnings threshold remain?
3. How should compulsory deductions be made affordable for workers facing low pay, debt or temporary hardship?
4. Does 25% government tax relief mean 25 pence for every £1 paid by the employee, and how should it interact with marginal tax rates?
5. Should the same minimum apply to employees, workers, agency staff and people in platform or gig-economy arrangements?
6. How should self-employed people be included where there is no employer available to provide a matching contribution?
7. Should pension pots follow the worker automatically, be consolidated into one default account or remain with separate schemes?
8. What limits should apply to fees, investment risk, default funds and access before retirement?
9. How should employers, particularly small firms, absorb the cost of a full contribution match?
10. Would Policy 32’s means test reduce the incentive to save, and how should private pension income be treated fairly?
11. What are the fiscal costs of tax relief and transitional employer support, and when might State Pension spending fall?
12. What independent modelling, pilot evidence and parliamentary scrutiny should be required before compulsion begins?

The proposed direction

Compulsory saving—with the final design open to scrutiny