New Pensions Commission to tackle widespread under-saving that will make future retirees poorer

Daily Mail​

21-07-2025

The Government has launched a new Pensions Commission to try to stop future retirees ending up poorer than older people today.
It says nearly half of working age adults are saving nothing at all into a pension - despite the success of auto enrolment into work schemes - and nearly 15million people are under-saving for retirement.
If nothing changes, retirees in 2050 will be living on £800 a year or 8 per cent less in private pension income than those in retirement now, it predicts.
Lower earners, the self-employed and some ethnic minorities are particularly at risk, and there is a stark 48 per cent gender gap in private pension wealth, according to the joint statement by the Treasury and Department for Work and Pensions.
The move to revive the first landmark Pensions Commission, which issued a report in 2006 that laid the groundwork for auto enrolment, is intended to devise plans to address these problems.
It will explore the 'complex barriers stopping people from saving enough for retirement', and report back in 2027.
The Government says:
- A woman currently approaching retirement can typically expect a private pension income worth over £5,000 less than that of a man, or just over £100 per week compared to just over £200 a week;
- More than three million self-employed people are not saving into a pension;
- One in four low earners in the private sector are saving into a pension;
- And one in four people from a Pakistani or Bangladeshi background are saving into a pension.
It adds that despite the introduction of automatic enrolment boosting the number who are saving, around one in two workers in the private sector only put aside the minimum contribution level.
Employers have to put a minimum of 3 per cent of your earnings between £6,240 and £50,270 into your pension, while workers put in 4 per cent and the Government adds 1 per cent in tax relief - adding up to 8 per cent.
However, many employers are willing to make 4 per cent, 5 per cent or 6 per cent in matching pension contributions if you opt to save a higher proportion of your income.
People aged 22-66 who earn at least £10,000 a year are eligible for auto enrolment.
New rules extending auto enrolment to young workers aged 18-21 and to lower earners to let them save from the first pound of earnings were passed into law in 2023, but have not been implemented yet.
The Pensions Commission will be made up of Baroness Jeannie Drake, who was a member of the original one, Sir Ian Cheshire and Professor Nick Pearce.
Alongside the Commission, the Government has launched a State Pension Age Review, which will draw up two independent reports for the Government to consider.
Work and Pensions Secretary Liz Kendall says: '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.'
Chancellor Rachel Reeves says: 'We're making pensions work for Britain.
'The Pension Schemes Bill and the creation of pension megafunds mean an average earner could get a £29,000 boost to their pension pots.
'Now we are going further to ensure that people can look forward to a comfortable retirement.'
Pensions Minister 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.'
Kate Smith, head of pensions at Aegon, says: 'To really move the pension dial, we are calling for the new Pension Commission to make bold, brave and possibly unpalatable recommendations to the Government, such as implementing significant increases to auto-enrolment contributions during the next parliament for those on mid and higher incomes.
'We're pleased the Pension Commission will investigate pension inequalities for key groups such as women, the self-employed and ethnic minorities, which will mean more people will save into a pension.
'Currently too many people are excluded from auto-enrolment as they don't meet the current criteria – they're too young, too old, self-employed or don't earn enough. This includes those with multiple low paid jobs, who are mainly women.'
Smith expressed disappointment there was no mention of reforms to auto enrolment - first raised in an overview in 2017 - to reduce the minimum qualifying age from 22 to 18, and to remove the lower salary threshold of £6,240 and calculate contributions from the first pound of earnings.
Rachel Vahey, head of public policy at AJ Bell, says: 'After 20 years, the government has breathed new life into the Pensions Commission, reviving it to solve the pension under-saving crisis of those due to retire in the mid-century.
'The Government's own analysis points to a dire need for intervention. While automatic enrolment has created 11 million new pension savers, many are saving the bare minimum.
'The demise of private sector defined benefit pensions and a levelling down of contribution rates by some private pension schemes have meant that, although there are more pension savers in the UK, they are not all saving enough.'
Vahey notes the Government has ruled out increasing employer pension contributions in this Parliament, but suggests the Commission looks at measures like higher contribution rates depending on earnings, moving away from the blanket minimum for all eligible workers.