Ministers to revive Blair-era Pensions Commission to tackle savings crisis
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Version 0 of 1. Revived body will examine future of the retirement system as analysis shows pensioner income is set to fall The government is resurrecting the Pensions Commission, amid fears that a retirement crisis could mean today’s workers will be poorer in retirement than the current crop of pensioners. The move by ministers to revive the landmark commission, established by Tony Blair’s government in 2002, comes as analysis shows that the income of pensioners is set to fall in the coming decades. There are warnings that people who plan to retire in 2050 will receive £800 a year on average, or 8% less private pension income than those retiring today. Meanwhile, four in 10, or nearly 15 million people, are not saving enough for their retirement, according to analysis by the Department for Work and Pensions (DWP). The revived Pensions Commission will examine the long-term future of the retirement system and make recommendations for change. Labour hopes its proposals, due to be reported in 2027, will gain cross-party support and be enacted beyond the current parliament. Liz Kendall, the secretary of state for work and pensions, said she was relaunching the commission to “tackle the barriers that stop too many saving in the first place”. The previous Pensions Commission, which produced its last report in late 2005, recommended automatically enrolling people into workplace pensions. As a result of this, 88% of eligible employees now save for a pension, up from 55% in 2012. However, DWP analysis has found that saving levels have remained low among those automatically enrolled into a workplace pension scheme, with roughly half of private sector workers only saving around the minimum contribution level, which represents 8% or less of earnings. Torsten Bell, the pensions minister, said the original commission “helped get pension saving up and pensioner poverty down” and a revived commission would “finish the job and give today’s workers secure retirements to look forward to”. Bell appears to have changed his mind about the value of a commission, having dismissed calls for a relaunch when speaking at an industry conference as recently as March, adding that a “technocratic” approach would not solve problems. The relaunched commission will include Jeannie Drake, who was a member of the original commission, along with the former chair of Barclays UK, Ian Cheshire, and Nick Pearce, a professor of public policy at the University of Bath. Analysis by the DWP has found that nearly half (45%) of working-age adults are not saving anything at all into their pension, with low earners, some ethnic minorities and the self-employed seen as particularly at risk. More than 3 million self-employed workers are not saving into a pension, it found, while this is also the case for a quarter of low earners in the private sector. Only one in four people from a Pakistani or Bangladeshi background are saving into a pension. There is also a stark gender gap of 48% in the private pension wealth of men compared with women. A typical woman who is now approaching retirement can expect a private pension income that is worth more than £5,000 less than that of a typical man. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion The new commission is expected to examine the entire pensions system and consider what is needed to build a future framework that is “strong, fair and sustainable”. Much like the original commission, which worked to build a national consensus on pensions, the commissioners will work with organisations including the business lobby group the Confederation of British Industry and the Trades Union Congress. Ministers have also launched a review into the state pension age – which now stands at 66 for men and women, but is likely to rise to 67 from May 2026 – and has commissioned two independent reports on this. Kendall’s move to resurrect the Pensions Commission has been broadly welcomed by the pension industry as well as trade unions. Paul Nowak, the general secretary of the TUC, said: “Far too many people won’t have enough pension for a decent retirement, and too many – especially women, BME [black, Asian and minority ethnic] and disabled workers and the self-employed – are shut out of the workplace pension system altogether.” The pensions commission announcement comes just days after the chancellor, Rachel Reeves, highlighted ongoing changes to pensions in her Mansion House speech, but stopped short of announcing the second phase of her pensions review. |