There are currently 15 million people under saving for retirement which could reach 19 million without action, leaving large groups across the UK facing a severe cliff-edge when they retire, according to a new report from the Second Pensions Commission. The report sets out the challenges that the UK’s pensions system is facing out to 2050.
Its final report is due in 2027, for implementation after this Parliament, and will make recommendations to government for a pensions system that is adequate, fair, and sustainable.
The report argues that the UK’s ageing population means there needs to be a new, sustainable approach to ensuring people have enough income in retirement, with responsibility shared between the state, employers and individuals. It focuses on four areas:
- For pensioners in 2050 and beyond to have adequate incomes in retirement will require higher rates of private pension saving and higher coverage. Automatic enrolment eligibility, earnings thresholds and the statutory minimum contributions all impact who is brought into pension saving and whether they save enough. The report highlights that many people are not saving enough for retirement, particularly among low and middle earners, the self‑employed and women.
- The existing State Pension is the firm foundation for retirement saving. It is critical to the retirement incomes of almost all pensioners and is the central means of ensuring that pensioners do not live in poverty. A means‑tested safety net will remain necessary but may need updating in light of the rising numbers of pensioners renting privately.
- People will need to lead longer working lives. Higher employment rates for older age groups who leave the labour market before the State Pension age are required to ensure sustainability and provide an important contribution to income adequacy in retirement.
- There must be stronger safeguards for how people draw down their pensions, with less risk placed on individuals while still keeping choice and flexibility
While the Second Pensions Commission is not reviewing Public Sector Pension Schemes or the Armed Forces Pension Scheme specifically, it does set out the wider fiscal and policy context / challenges future governments will face when determining long term pension policy. And such context will set the scene for any future (as yet unannounced) review into Public Sector Pension provision.
Our policy position remains based on our 5 key pillars which we review periodically to ensure they remain fit for purpose.
You can read the report dated 19 May from the Pensions Commission and submit your views at:
Pensions 2050: evidence and future priorities
Further reading: Britain is undersaving for retirement warns Pensions Commission
*Policy reforms since 2006 were shaped by the work of the first Pensions Commission,
