Baroness Jeannie Drake is to lead a new Pensions Commission, which will seek cross-party and industry consensus on improving pensions adequacy.
Alongside this Commission the Government has also launched a state pension age review, commissioning two independent reports to determine how to set the SPA for future decades.
The Commission will look at a range of issues, which will include current auto-enrolment contribution levels, and how to tackle the problem of certain groups saving very little for retirement — including the self-employed, low earners and some ethnic minorities.
The Commission is due to report in 2027, with a series of recommendations to improve future retirement incomes and address the barriers that currently prevent some saving for retirement. This is the second phase of the government’s pension review, which will have a focus on retirement adequacy. The first phase of the review brought in changes which will see the creation of pension ‘mega-funds’ in the workplace sectors, designed to boost investment into a wider range of assets and deliver better value for money for savers.
However today’s announcement confirmed that proposals for change will be beyond the current Parliament, with no increase too AE levels within the next four years.
This announcement revives the landmark Pensions Commissions which was set up at the start of the century and led by Lord Turner, and resulted in the introduction of auto-enrolment.
The Pensions Commission will be made up of Baroness Drake, a member of the original Commission, Sir Ian Cheshires and Profession Nick Pearce. The three will be responsible for steering the Commission’s work.
It will aim to build a national consensus working with a number of stakeholders, including the Confederation of British Industry, the Trade Union Congress and the wider pensions industry. The announcement of the Commission and its remit has been broadly welcomed by pension providers, particularly across the workplace sector.
Announcing the launch of this Commission, the Department of Work & Pensions said that it would look at what is required to ‘future-proof’ a pensions system so that it is strong, fair and sustainable.
It pointed out that retirees in 2050 are on course of 8 per cent less private pension income than those retiring today, with nearly four in 10 people — or 15m people — under-saving for retirement.
It says almost half of working age adults (45 per cent) saving nothing at all into a pension, with the self-employed least likely to be making retirement savings.
Announcing the remit of this Pensions Commission, the minister for pensions Torsten Bell says: “The original Pensions Commission helped get pension saving up and pensioner poverty down. But if we carry on as we are, tomorrow’s retirees risk being poorer than today’s. So we are reviving the Pensions Commission to finish the job and give today’s workers secure retirements to look forward to.”
The Work & Pensions Secretary Liz Kendall adds: “People deserve to know that they will have a decent income in retirement – with all the security, dignity and freedom that brings. But the truth is, that is not the reality facing many people, especially if you’re low paid, or self-employed.
“The Pensions Commission laid the groundwork, and now, two decades later, we are reviving it to tackle the barriers that stop too many saving in the first place.”
CBI chief executive Rain Newton-Smith says: “The only route to higher living standards both in work and in retirement is through higher growth, productivity and better savings. As we look to the next decade and beyond, finding a consensus across business, government and our society on how to support people to save by building on the Mansion House reforms can create a pathway to a better future.
“Taking the time to review the best pathway to achieve this, whilst pursuing broader measures to support growth, will be needed to make it affordable for employers and workers and crucial to the aim of rising living standards, now and in retirement.”
Paul Nowak, General Secretary of the Trades Union Congress adds: “Everyone deserves dignity and security in retirement, but right now many workers – especially those in the private sector – will find themselves without enough to get by on. Far too many people won’t have enough pension for a decent retirement, and too many – especially women, BME and disabled workers and the self employed – are shut out of the workplace pension system all together. That’s why reviving the Pensions Commission – bringing together unions, employers and independent experts – is a vital step forward.
“Twenty years ago the Pension Commission played a key role in bringing millions more people into workplace pensions and reducing the risks of pensioner poverty. We now have a chance to build on that work by reaching a long-term consensus on extending auto-enrolment to those workers still missing out, and making sure that this system delivers the decent retirement incomes all workers need.”
