20-07-2025
Making pensions popular is tough but vital
This column is about pensions. Please read it anyway. I know from running polls and focus groups, and from everyday life, that many people think pensions are boring, something to ignore, to put off until another day. Some of those people are politicians. They often see pensions as a low priority because decisions made today won't come home to roost for decades — after their next election and, quite likely, after the end of their careers.
So Labour ministers should be commended for launching a Pensions Commission to address some of the biggest, slowest and trickiest issues in public policy. It'll do some good but the people responsible might not be around to get the credit. Though given that Torsten Bell, the annoyingly clever pensions minister, is also an annoyingly youthful 42, maybe he'll prove an exception.
The commission's job is to ensure more money goes into the pension pots that will, eventually, support people in later life. This is a big, bad problem. Depending on how you measure it, more than a third of young workers are already on course for an inadequate retirement income. Women, ethnic minorities and the self-employed are especially at risk.
Behind all this is one of the biggest yet least discussed changes of our age. This is the demise of defined benefit (DB) pensions, which guarantee a retirement income, and the shift to defined contribution (DC) schemes, which don't, because they're just pots of money put away until later. This is a big transfer of risk and responsibility from institutions (employers, mainly) to individuals. For earlier generations, someone else took decisions and responsibility for us in later life. Those of us who retire in the 2030s and beyond are going to be on our own. On our own to ensure we have enough to live on. On our own to decide how to make our savings last.
Our longer lifespans make DB pensions unaffordable to employers. The same logic will inevitably push up the state pension age and, eventually, sweep away the unsustainable triple lock. Financial necessity means we will increasingly rely on private savings to support people in later life.
But that necessity leads to a rewriting of the social contract, a rebalancing of what we owe to one another, and to future generations. As a society we are nowhere near grasping the scale and implications of this shift. The new commission can make a start on that but only if it can avoid the temptation to simply repeat things that have worked before, because the methods of the early 2000s can't be relied on now.
The 2025 panel is a conscious echo of the Turner Commission, which ran for four years from 2002 and became the Platonic ideal of technocratic policymaking. Chaired by Adair Turner, a group of benign sages crafted every Whitehall wonk's favourite policy: auto-enrolment. By setting a new default of workers paying into a DC pension, Turner helped nudge more than ten million people into saving for their own retirement. Millions of people who have never heard of Turner or its work will be happier in later life because of it.
Some people in the pensions sector hope that the new commission can repeat the Turner trick, magicking up a clever policy tweak that lulls workers and employers into putting aside non-trivial slices of cash for future decades. Some think that Australia shows how to boil this frog, with a series of staged increases in contributions from workers and companies scheduled years ahead.
I'm not convinced. UK politics has moved a long way from the days of Turner. A comfortable consensus among experts about doing something in our long-term best interests sounds lovely to me. But also very fragile. What happens if an opposition politician on the make (Hi Nigel! Hello Kemi!) decides to rebrand 'incremental increases in workplace pension contributions' as 'a massive raid on wages and jobs'? Because in the end, the money that goes into pensions today has to come from somewhere.
A small part of the answer is in old-fashioned salesmanship: sell higher pension contributions in populist terms. Without decent savings, you'll spend your later life dependent on others, including an unreliable state. To really Take Back Control of your future, put more in your pension pot.
But the bigger challenge here is to look beyond stealthy tweaks and address the public indifference that makes stealth necessary. To deliver real good, and earn history's plaudits, clever Mr Bell and his clever commission must change the way the country thinks and feels about pensions. We should require employers to disclose and display their pension contribution rates on all job ads, so workers recognise them as part of pay. Automatically open a private pension pot for every child born in Britain and offer tax breaks to parents and relatives paying into pots with a marketable name. ('Happy birthday, darling. I've put £20 in your BritSaver.')
Level with the country about the vast difference in pension provision between the public and private sectors but also within the public sector: there is a big difference in pension provision for doctors and dinner ladies. Make pensions a central and visible part of our lives. Tell people, again and again: your pension is your money, so take it as seriously as you would any other cash. Instead of taking inertia and indifference as constants, start a proper conversation with the country about pension saving.
Many of my fellow pensions nerds think what I'm describing is impossible. They say people can't be persuaded to fully engage with pensions — the subject is too complicated, too distant, too boring. Hence policy must be done by stealth; despite us, not with us. But in an age of populism, that just won't do. Culture isn't just upstream of politics but of policy, too. We don't need new pension policy as much as we need new cultural norms around pensions.
Boring? Pensions are about life and death, about fairness, duty, self-reliance. Pensions are about security, freedom and comfort for millions of people. Good pensions policy is about looking after our children and their children, when they are grown and old. Getting this right will mean that long after we're gone, their lives will be better than they would otherwise have been. If we can't make that story engaging, we deserve the judgment of history that future generations will pass on us in their impoverished later lives.
James Kirkup is a fellow of the Social Market Foundation
