A new Pensions Commission has been established by the government to investigate why pensioners of tomorrow are expected to have less money than those of today and to make recommendations on how to improve things.
If nothing changes, a new analysis shows that retirees will see their incomes fall in the next few decades. In 2050, people retiring will have 8% less in private pension income compared to those retiring now.
Nearly half of adults in working age still do not save anything for retirement. Low-earners, ethnic minorities, and self-employed people are the least likely to save.
The Pensions Commission will examine the reasons for why people do not save enough money for retirement, and make recommendations on how to remedy this.
The analysis shows that nearly 15 million Americans aren’t saving enough money for retirement.
Since the introduction of automatic enrolment, in 2012 there has been a decrease in average contributions. Around 30% of private sector workers only save the minimum amount.
This analysis also shows a gap of 48% in the private pension wealth between men and women. Men who are approaching retirement can expect to receive a private pension of PS11,000. Women, however, will only get PS5,700.
One in four Pakistani and Bangladeshi adults of working age saves for a pension compared to the 56% of white workers.
Liz Kendall, the work and pensions minister, said that people deserve to know they’ll have a decent retirement income – and all of the security, dignity, and freedom it brings. The truth is that many people do not have a decent income in retirement, particularly if they are low-paid, women, or self employed.
The second phase of the Pensions Commission shows our commitment to helping people plan for a secure retirement. We are tackling the obstacles that prevent too many people saving.
In the late 90s, nearly half of all self-employed individuals contributed to a pension. Today, that number is less than 20%.
The report will examine the barriers that prevent people from saving enough money for retirement. It will focus on issues affecting women, low-paid workers and youth, with a final report due by 2027.
The panel was given the task of building on the success of the Pensions Commission from 2002-06 under the chairmanship of Adair Turner. This commission led to an increase of more than 10 millions people contributing to workplace pensions.
The government has pledged not to increase employer contributions for pensions during this Parliament.
The Pensions Commission is made up of Baroness Jeannie, who was a member of the original commission. Sir Ian Cheshire will chair the Institute for Government and Professor Nick Pearce will direct the Institute for Policy Research.
The commission will propose changes that go beyond the current Parliament to create a pensions system that is fair, strong and sustainable. The government also commissioned independent reports in order to decide on the age of state pension for future decades.
Neil Carberry, REC’s Chief Executive, stated: “There’s no doubt that saving for a sustainable pension is important. One of the greatest successes of the past 20 years has been the introduction of automatic enrolment, which was based on consensus, and employer contributions starting in 2012. This change was not free. Businesses have paid more to partner with their employees. This settlement should be reviewed with the business community, not against them. The jury is still out as to whether we can replicate the success of the Turner Commission. It was the deep partnership between business and the Turner Commission that made this commission successful.
“We are concerned about the impact this announcement will have on a wider audience. The UK’s employment costs have been increasing, and it is important that we are a place where people want to work. The technology that is reshaping the labour market is causing concern amongst firms.
Morgan Vine is the director of Independent Age’s policy and influence. She said, “This is a great opportunity to ensure that future pensioners receive an adequate income in order to live a dignified life later on.” The last Pensions Commission transformed many lives and our research shows that poverty will increase in older age without intervention.
“We are disappointed by the fact that the review won’t include a focus of incomes for people who have reached the state pension age. Our advisers are constantly hearing about the tough decisions that older people with low incomes make to survive. These include skipping meals or reducing their showers to save money. “We urge the UK Government to not forget the two million older people who are currently living in poverty, and the additional one million just above it. Put in place tangible measures to support them as well.”
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