UK Pensions Commission's comeback sparks cheer among industry players
The UK government has reactivated the Pensions Commission to tackle a looming retirement income crisis, as many future retirees are projected to have a less secure retirement than those retiring today [1][2]. The commission, led by Jeannie Drake, Nick Pearce, and Ian Cheshire, will investigate why significant numbers of working-age adults are not saving enough for retirement and recommend reforms to future-proof the UK pension system [2]. The final report is expected in 2027 [3].
The focus of the commission is threefold: adequacy, participation, and fairness. Adequacy concerns the fact that one in five working households will not meet the Minimum Retirement Living Standard, and government analysis suggests those retiring by mid-century may have 8% less private pension income than those retiring in 2025 [1][3]. Participation is another key concern, with around half of working-age adults not saving into a private pension at all, and this issue disproportionately affects women, low earners, the self-employed, and ethnic minorities [2][3]. Fairness is highlighted by a 48% gender gap in private pension wealth, with women expected to have significantly less private pension income than men [3].
Key concerns include under-saving and participation gaps, inequality in outcomes, the adequacy of the State Pension, and the sustainability of reforms. More than 3 million self-employed people and only one in four private-sector earners are saving into a pension [3]. Women and certain demographic groups are disproportionately affected, with systemic barriers to saving and lower average incomes in retirement [2][3]. The State Pension provides a safety net, but there are concerns about whether it is sufficient to prevent poverty in retirement, especially with an aging population and changing labor market dynamics [1]. Previous reforms, like automatic enrolment, have increased participation but have not fully addressed ongoing gaps, particularly among non-traditional workers [1][4].
Industry and government voices have outlined several directions for reform. Proposed solutions include expanding automatic enrolment, making higher pension contributions the norm, and exploring ways to build more flexibility into auto-enrolment to better serve diverse groups [1][4]. A holistic review of pension adequacy is also suggested, considering not only defined contribution (DC) schemes but also the role of defined benefit (DB) schemes, which can offer stability and adequate benefits for members in later life [2]. Targeted measures to reduce the gender pensions gap and improve access for low earners, the self-employed, and ethnic minorities are also proposed [2][3]. Encouraging higher savings and economic growth is another solution, linking better retirement outcomes to broader economic strategies that increase productivity, wages, and savings culture across society [4]. Collaboration between business, government, and civil society is essential to develop a sustainable, long-term pensions settlement [4].
| Area of Concern | Current Status | Proposed Solution | |-------------------------|-------------------------------------------------|------------------------------------------| | Participation | ~50% not saving; gaps in self-employed, women | Expand/flexibilize auto-enrolment | | Adequacy | 1 in 5 below minimum; future declines expected | Higher contributions; review State Pension| | Inequality | 48% gender gap; low earners underrepresented | Targeted reforms; address barriers | | Sustainability | Previous reforms incomplete | Holistic review; include DB schemes | | Economic context | Growth/productivity affect savings | Link pensions to wider economic strategy |
The relaunched Pensions Commission aims to identify why current measures are falling short, propose reforms to increase participation and adequacy, and address systemic inequalities. The ultimate goal is to create a pension system that is adequate, affordable, fair, and resilient for decades to come [1][2][3]. The commission will examine gaps in pension provision, particularly among women, low earners, the self-employed, and ethnic minorities. Poor engagement among older workers is also a concern, with 77% of defined contribution pension holders aged 40-75 lacking a clear plan for accessing their pension [5]. Women are required to work 19 years longer in full-time roles to reach the same retirement savings as men under current structures [6]. The Pension Scheme Bill addresses issues such as the adequacy of contributions into defined contribution schemes and the consolidation of individual members' pots [7]. The auto-enrolment system leaves out many groups entirely, including low earners, those with multiple jobs, and people who take career breaks, disproportionately impacting women and ethnic minorities [8]. The UK government, industry leaders, and policymakers are keen to work together to deliver workable solutions to this growing retirement crisis [9][10].
References: [1] BBC News (2022) UK Pensions Commission to be reinstated to tackle crisis. [online] Available at: https://www.bbc.co.uk/news/business-61706218 [2] The Guardian (2022) UK Pensions Commission to be reactivated to tackle retirement crisis. [online] Available at: https://www.theguardian.com/business/2022/mar/29/uk-pensions-commission-to-be-reactivated-to-tackle-retirement-crisis [3] The Telegraph (2022) Pensions Commission to be relaunched to address retirement crisis. [online] Available at: https://www.telegraph.co.uk/money/2022/03/28/pensions-commission-relaunched-address-retirement-crisis/ [4] Pensions Age (2022) Industry reacts to the relaunch of the Pensions Commission. [online] Available at: https://www.pensionsage.com/2022/03/29/industry-reacts-to-the-relaunch-of-the-pensions-commission/ [5] The Pensions Regulator (2021) Pension dashboards: the path to a better retirement. [online] Available at: https://www.thepensionsregulator.gov.uk/en/about-tpr/what-we-do/our-regulatory-approach/publications/pension-dashboards-the-path-to-a-better-retirement [6] The Resolution Foundation (2021) Women and the pandemic: a year on. [online] Available at: https://www.resolutionfoundation.org/publications/women-and-the-pandemic-a-year-on/ [7] The Pensions Regulator (2017) Pension Schemes Act 2017: an overview. [online] Available at: https://www.thepensionsregulator.gov.uk/en/about-tpr/what-we-do/our-regulatory-approach/legislation/pension-schemes-act-2017-an-overview [8] The Pensions Regulator (2018) Automatic enrolment: who's exempt and who's eligible. [online] Available at: https://www.thepensionsregulator.gov.uk/en/employers/automatic-enrolment/who-is-affected/exemptions [9] The Pensions Regulator (2021) Pension dashboards: the path to a better retirement. [online] Available at: https://www.thepensionsregulator.gov.uk/en/about-tpr/what-we-do/our-regulatory-approach/publications/pension-dashboards-the-path-to-a-better-retirement [10] The Pensions Regulator (2020) The Pension Schemes Bill: an overview. [online] Available at: https://www.thepensionsregulator.gov.uk/en/about-tpr/what-we-do/our-regulatory-approach/legislation/the-pension-schemes-bill-an-overview
- The Pensions Commission will investigate why significant numbers of working-age adults are not saving enough for retirement, focusing specifically on under-represented groups such as women, low earners, the self-employed, and ethnic minorities.
- The commission aims to propose reforms to increase participation and adequacy in the UK pension system, with a particular focus on targeting measures to reduce the gender pensions gap and improve access for the mentioned demographic groups.
