The UK government is reinstating the Pensions Commission to tackle concerns that today’s workers may face higher risks of poverty in retirement compared to their parents. Experts have warned that individuals retiring in 2050 could receive £800 less annually than current pensioners.
The Department for Work and Pensions (DWP) reports that 45% of working-age adults are not contributing to their pensions. Work and Pensions Secretary Liz Kendall announced the revival of the Pensions Commission, last convened in 2006, to address barriers preventing adequate savings.
The previous commission’s recommendation of automatic enrolment in workplace pensions increased the number of employees saving from 55% in 2012 to 88%. However, DWP analysis indicates that 15 million people are undersaving, with the self-employed, low-paid workers, and certain ethnic minorities notably affected.
Approximately three million self-employed individuals are not saving for retirement, while only a quarter of low-paid private sector workers and those from Pakistani or Bangladeshi backgrounds are saving. Women face a significant gender pensions gap, with those nearing retirement expected to receive half the income of their male counterparts.
Pensions Minister Torsten Bell stated that while the original commission improved savings and reduced pensioner poverty, current trends suggest future retirees may be worse off. The commission, led by Baroness Jeannie Drake, will report in 2027 with proposals extending beyond the next election. The initiative has received broad support from the pensions industry.
Kate Smith, head of pensions at Aegon, urged the commission to consider “bold, brave and possibly unpalatable recommendations,” including significant increases to auto-enrolment contributions post-2029. She highlighted the need to address broader issues, such as labour and housing market dynamics and societal norms impacting savings.
Caroline Abrahams from AgeUK emphasised the importance of addressing the state pension, which forms the primary income source for most retirees. She called for reforms that enable more individuals to secure a decent standard of living in retirement.
Ministers aim for the commission to build consensus on necessary changes by collaborating with businesses and trade unions. Rain Newton-Smith, CEO of the Confederation of British Industry, stressed the importance of higher growth, productivity, and savings for improved retirement living standards.
Paul Nowak, general secretary of the Trades Union Congress, highlighted the need for inclusive pension systems, particularly for women, BME, disabled workers, and the self-employed. He described the commission, which will unite unions, employers, and independent experts, as a vital step forward.
