Pensions Commission ‘can help build a UK pensions system for future generations’

Tom Barton and Simon Laight, pensions law experts at Pinsent Masons, were commenting after the UK government announced the revival of the Pensions Commission, nearly two decades after its original formation. The decision comes amid stark warnings that future generations of pensioners are on course to be significantly poorer than today’s retirees.

Laight said: “The Pensions Commission represents an important opportunity to improve the system for future generations, focusing on ‘under pensioned’ groups such as self-employed workers, women and ethnic minorities. However, there are a number of complex issues the commission will have to grapple with, and a well-researched and thoughtful strategy will be essential to the success of future proposals. This will inevitability take time to develop, giving the government some temporary breathing space.”

The newly re-established commission will be tasked with investigating the long-term sustainability and adequacy of the UK’s pension system. It aims to confront the alarming trend of under-saving, particularly among low earners, the self-employed, and ethnic minority groups.

Barton said: “The first Pensions Commission moved the dial with auto-enrolment, creating new savers, new schemes and products and a huge, and ever growing, pool of pensions capital. The new Pensions Commission has its own terms of reference which broadly relates to adequacy and a pensions system which can deliver for the mid-21^st century. This therefore seems to be a commission to figure out how we adjust to defined contribution savings as the main or primary source of pension income in retirement. We have already seen waves of regulation and consolidation in the defined contribution space, but it remains to be seen whether we will see a hike in contributions.”

According to new government analysis, retirees in 2050 are projected to received £800 – or 8% - less in private pension income compared to those retiring today. Nearly 15 million working-age adults are currently under-saving for retirement, with 45% saving nothing at all into a pension, the research found. The gender pensions gap is also highlighted by the study, with the commission set to look at the complex barriers preventing different groups of people from saving enough for retirement.

The commission’s final report is not expected until 2027 and the government has confirmed that there will be no increase in auto-enrolment contributions for employers during this parliament. Alongside the commission’s work, the government has launched a review of the state pension age, as required by the 2014 Pensions Act.