Government revives pensions commission to tackle looming retirement crisis

In a significant move to address growing concerns over retirement security, the UK Government has revived the landmark Pensions Commission. Originally established in the early 2000s, the Commission was set up to confront a looming crisis that threatens to leave future pensioners poorer than those retiring today. Ministers have announced its revival as part of broader efforts to secure future financial stability.

A system under strain

New analysis reveals that retirees in 2050 are projected to receive £800, or 8%, less in private pension income compared to today’s pensioners. Alarmingly, nearly 15 million working-age adults are under-saving for retirement, with 45% contributing nothing to a pension. Groups such as low earners and the self-employed are disproportionately affected.

Gender disparities and contribution gaps

The gender pension gap remains stark, with women approaching retirement expected to receive £5,000 less annually in private pension income than men. While automatic enrolment has increased participation – 88% of eligible employees now save into pensions, up from 55% in 2012 – many still contribute only the minimum required, which is often insufficient for a secure retirement.

Commission objectives and leadership

The revived Pensions Commission – led by Baroness Jeannie Drake, Sir Ian Cheshire and Professor Nick Pearce – will investigate the structural barriers preventing adequate pension savings. Its final report is expected in 2027, and will propose reforms aimed at creating a strong, fair and sustainable pension system.

This initiative builds on the findings of the recent Pensions Investment Review and the Government’s Pension Schemes Bill, which aimed to boost investment and economic growth. The Commission will also consider the future of the State Pension, which remains the primary income source for 13% of UK pensioners.

The origins of the Pensions Commission

The original Pensions Commission was set up in the early 2000s to look at the UK’s private pension system and long-term savings landscape. Over several years, it published three major reports, with its final recommendations released back in 2005.

At the heart of its review were four key options for tackling the challenge of pension financing:

• Accept higher levels of pensioner poverty
• Increase public spending on pensions
• Encourage people to work longer
• Boost individual saving

Its most enduring legacy is the introduction of automatic enrolment, a policy that has transformed how millions of people save for retirement. Under this system, most employees over the age of 22 are automatically enrolled into a workplace pension when they start a new job.

Looking ahead

The Commission’s work is expected to shape the future of retirement in the UK, ensuring that pension systems evolve to meet the needs of a changing workforce. By addressing gaps in coverage and adequacy, the Government aims to secure better outcomes for tomorrow’s retirees, and prevent widespread pensioner poverty.

Proposed actions for enhancing pension systems

To combat the savings crisis, the Pensions Commission will delve into various reforms. A primary focus is the private sector's engagement in pension contributions and the potential for new tax incentives to bolster retirement savings. The Commission will examine policies that better support self-employed workers, ensuring their ability to save for retirement parallels that of traditionally employed people. Comprehensive evaluations of retirement saving practices will shape recommendations for advancing pension coverage and adequacy in the long term.

*Source: https://www.gov.uk/government/news/government-revives-landmark-pensions-commission-to-confront-retirement-crisis-that-risks-tomorrows-pensioners-being-poorer-than-todays