There has been broad industry support for the revived Pension Commission which will seek to make recommendations with the view to improving retirement adequacy.
Many providers want to see action taken to support those who are failing to save enough for retirement — and welcomed the attempt to build consensus on this issue amongst employers, providers, taxpayers and those representing the interest of ordinary workers. However there were concerns that the timetable was too slow, with recommendations not due to be implemented until the next Parliament, which could lead to delays or a potential water-doing of decisions that might be politically difficult to implement.
Steve Webb, a partner at LCP and former pensions minister says: “The first Pensions Commission changed the UK pensions landscape and started the process of reform by getting millions of employees saving for the first time.
“But much work remains to be done, and this new Commission will have to consider reforms against a much more challenging backdrop. The Government has selected people who are widely respected in the world of business, the trade union movement and academia, who will be well placed to undertake this vital work, and I look forward to working with them constructively as they map out a new agenda for retirement saving.
Scottish Widows CEO Chira Barua says: “We’ve been mapping trends in the UK’s retirement saving for 20 years and while automatic enrolment has been a gamechanger in kickstarting pensions saving for millions of workers, 39 per cent (around 15 million) still risk facing poverty in retirement and action needs to be taken while there’s still time.
“Bringing all the right groups and the pensions industry together in this way made real progress last time, and we look forward to supporting the Commission in getting closer to cracking the pension crisis.”
Many industry experts said it was important that Government acted swiftly on recommendations made by the Pensions Commission.
Isio DC specialist and director Matt Calveley says: “The return of the Pensions Commission rightly brings adequacy to the forefront of the pensions agenda. From savings levels and projected retirement incomes to the gender pensions gap, the findings paint a clear picture – the current system is falling short for too many people. We welcome this renewed focus, but the challenge now is turning analysis into action.
“DC pensions are now the main retirement vehicle for millions, but for most savers the current minimum 8 per cent contribution level simply won’t deliver a decent standard of living in retirement. We need a more inclusive approach that recognises a wide range of circumstances, with reforms that are proportionate, flexible, and designed to support people across the income spectrum. That must include tackling structural inequalities like the gender pensions gap, which continues to penalise women for time out of the workforce or lower-paid, part-time roles.
“Adequacy doesn’t stop at contributions. It’s also about what people get out of the system. We urgently need innovation at the decumulation stage so that people can turn their pension pots into reliable, sustainable income. If we get both ends right, increasing what goes in and improving what comes out, we can make a lasting difference to retirement outcomes across the UK.”
Hymans Roberston head of pensions policy innovation Calum Cooper said this was another “significant step” in transformation of the pensions landscape. “A commission is an essential ingredient of a re-kindled social contract, and long-term financial independence and sustainability. It’s a step we have strongly advocated for and fully support.”
Cooper said that with an 18-month window, cross-party backing, and a wide remit, today’s announcement feels refreshingly serious. “It is a real opportunity to build a sustainable system from the ground up.”
Cooper adds: “While it’s disappointing that the triple lock and state pensions won’t be examined, we recognise the political reality. We would have liked to have seen a shorter time frame for the Commissions’ window, given the changes will only be publicised after the Pensions Commission report, and most likely on a phased basis.
“However, overall, this offers a rare chance to return pensions from partial and passive pots into inclusive and purposeful incomes in later life. The appointments announced reflect a balanced blend of worker advocacy, academic rigour and business pragmatism.”
Fidelity International head of platform policy James Carter says welcomed the launch of the commission but said it was important that measures to address adequacy were addressed promptly.
“Despite the success of auto-enrolment, we know that many people are not saving enough and risk reaching retirement with a significant financial shortfall. This is particularly true of certain demographic and working groups, and the Commission’s plans to explore this are a welcome step towards narrowing the pension gaps that exist.
“With the UK’s growing reliance on defined contribution pensions, it’s essential that state, workplace, and private provision are considered together to ensure a secure retirement for today’s savers and future generations. Considerations must be made towards both eligibility for automatic enrolment, how the quantum of contributions might increase in the future and how workplace pensions together with the State Pension can provide fair and adequate retirements. This review comes at a time of economic pressure for both public finances and employers, and we must acknowledge the challenges this presents.
“While we support the Commission’s work, we call for urgent progress. Delays will only widen the pensions gap and undermine outcomes for future retirees. Balancing the need to raise contribution levels with what is affordable for employers and individuals will not be easy – but it is necessary.”
He adds: “We also encourage the Government to take a holistic view, including pensions taxation in its considerations, to help shape a sustainable and effective policy framework for the future and avoid the constant speculation about pension taxation changes which risk causing real harm to consumers”.
Mercer head of retirement and investments Phil Parkinson adds: “We would have liked to see a shorter time frame for the conclusion of the commission as we need to address the inter-generational savings gap now.
“We estimate the savings gap will be £25 trillion by 2050 and that cost will be borne by future generations. The longer we take to address this challenge the larger the savings gap will be, and the more challenging it will be to in turn find ways to fund other public programs such as the NHS.
“For this commission to be successful we need collaboration across different groups including the Government, savers, employers and the pension industry. A critical success factor will be to align all stakeholders on the value the system can deliver, as opposed to simply its costs. The Commission should also look at other pension schemes around the world where lessons can be learnt. With our unique data and global expertise, we will engage with the Commission to help develop its evidence base to create a pensions system fit for the future.”
People’s Partnership CEO Patrick Heath-Lay says: “Reviving the Pension Commission will give us a chance to take a fresh look at pension reform from the bottom up – to ask what savers really need and how we can better support them, with the focus firmly on helping people achieve the retirement they deserve.
“There is clear evidence that millions of people aren’t saving enough for the standard of retirement they would like, so it’s vital that the Government works with the pensions industry, business community and unions, considering every option and ensuring that all voices are heard.”
Legal & General CEO António Simões adds: “Saving enough for retirement isn’t just important, it’s urgent to securing individual futures and building a more prosperous society. To do this we must tackle adequacy – we need people to be able to contribute the right amount from the first pound they earn, and to build a pot that is invested in assets that will generate returns to support them in later life.
“That’s why the launch of the new Pensions Commission matters. Whether that is gradually increasing minimum auto-enrolment contribution rates or making it easier to access private market investments, it is time to break down the barriers to building a retirement pot that are faced by millions across the country.”
