People retiring in 2050 will be worse off than pensioners today, unless action is taken to boost retirement savings. The Department for Work and Pensions is reviving the Pensions Commission to look at how to tackle the issue. Almost half of working-age adults are not putting any money into a private pension, with low earners and the self-employed less likely to be pension saving. The shortfall is also worse among women and some ethnic groups, with only one-in-four people of Pakistani or Bangladeshi background saving in a private pension.
People drawing their pension 25 years from now are set to be £800 or 8% worse off per year than their counterparts today, with four in 10 people currently not saving enough for their retirement. The government said it was reviving the “landmark” Turner Pension Commission which reported in 2006, under the last Labour government, and led to the roll-out of automatic enrolment into pension saving.
Despite progress, new analysis revealed “stark” findings including that more than three million self-employed workers are not saving into a pension, only one-in-four low earners in the private sector are saving into a pension, and only one-in-four of people of Pakistani or Bangladeshi heritage are saving. The analysis also found a 48% gender gap in private pension wealth among people currently retiring, with a typical woman receiving just over £100 a week and a man receiving £200 from private pension income.
The commission is not designed to directly address issues around the cost of the state pension, but will look at savings in private sector pensions. It will bring together trades unions, employers and independent experts to look at what is preventing people from putting more into their retirement pots and will aim to build a national consensus around future strategy.
Experts are urging the Commission to make “bold, brave and possibly unpalatable recommendations”, including “significant increases” to auto-enrolment contributions after 2029. 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.
The state pension provided the bulk of income for most pensioners, but it was “hugely important” to consider the role of private savings, as the current system was leaving many pensioners struggling to make ends meet. Hopefully this can be avoided in future and particularly disadvantaged groups, including low-paid women and self-employed people on low incomes, can be helped to put money aside when appropriate for them to do so.
17 million people were not saving enough to achieve the retirement they wished to have. The next two decades is when the effects of the savings crisis will really start to bite. It was crucial that the Commission was able to take a step back and view the system in its entirety, and examine how different elements of the system are working together.
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