Labour MP Emily Thornberry has called for public sector workers to have access to their pension pot before they retire, claiming it would help boost the economy.
Writing in Politics Home, Ms Thornberry, shadow secretary of state for foreign and commonwealth affairs, said former public sector workers with fewer than two years of pension rights built up should be able to take 75 per cent of their money as a lump sum before retirement while still having the choice to wait until age 55 and receiving access to the entire pot.
She claimed this would help boost the economy as it is estimated that the level of existing unfunded public sector pension liabilities is £1.7trn and paying out costs the government £40bn per year.
Ms Thornberry said this cost is likely to increase each year due to the growing population and expansion in public services.
She said: “No one on the government benches talks about this – it’s someone else’s problem decades from now – but you can see how much it worries our civil servants. They have no idea how we’re going to deal with the long-term bill, any more so than the long-term costs of social care.”
Ms Thornberry has claimed allowing people to access their pensions earlier would help solve this issue.
If this policy proved popular she said the government could then allow early access to former public sector workers with four years of pension rights and increase this gradually to ten years by the end of parliament.
However, she warned this policy would have to be tax neutral and those in pre-retirement should not gain a tax advantage or disadvantage.
There would also be a short-term cost of providing this option, which would have to be funded through borrowing.
Ms Thornbery said: “Even if it means an increase in short-term borrowing, the credit agencies, investment firms and others will all see that it puts Britain on a much sounder footing in terms of our long-term fiscal health.
“We would therefore have a practical measure, that starts to tackle a major long-term threat to the public finances, but at the same time puts money into the pockets of millions of working people on low-to-medium incomes, at a time when the economy is slowing down.”
Ms Thornberry was eliminated from the Labour leadership race after failing to secure enough nominations by midnight on February 14.
She received 31 nominations from local constituency parties, which was two short of the 33 needed, and did not get any nominations from Labour Party affiliates.
This means Sir Keir Starmer, Rebecca Long-Bailey and Lisa Nandy are now in the running to succeed Jeremy Corbyn as leader.
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