In response to this warning, the Department for Work and Pensions (DWP) is bringing back the Pensions Commission, which first reported nearly 20 years ago, to figure out how to tackle this. They’ve also commissioned the next review of the State Pension age, which is currently 66 but set to hit 68 between 2044 and 2046.
Stark stats
The statement detailed that almost half of working-age adults aren’t paying into a pension at all, with low earners, self-employed, and some ethnic minorities are particularly at risk – only one in four people of Pakistani or Bangladeshi background are saving into a pension.
The DWP estimates that people drawing their pension 25 years from now could be £800 (or 8%) worse off per year than equivalents today, with four in ten people currently not saving enough for retirement. The analysis found that:
- Over three million self-employed workers aren’t saving into a pension.
- Only one in four low earners in the private sector are saving into a pension.
- Only one in four people of Pakistani or Bangladeshi heritage are saving.
The analysis also found a significant 48% gender gap in pension wealth among current retirees, with a typical woman receiving just over £100 a week compared to a man receiving £200 from pension income.
Future-proofing pensions
To tackle the stark findings in the DWPs analysis, the government is reviving the landmark Pension Commission which led to the rollout of automatic enrolment into workplace pension schemes. The initiative has seen 88% of eligible employees now saving — up from 55% in 2012.
It’s worth noting that the Commission isn’t directly addressing issues around the cost of the State Pension. The relaunched Commission will explore the barriers people face when it comes to saving for retirement, the pension system as a whole, and what is required to future-proof it. Its final report won’t be submitted until 2027.
It will bring together trade unions, employers, and independent experts (some of whom were involved in the original Commission). Their goal is to understand what’s stopping people from putting more into their retirement pots and to build a national consensus around a future strategy.
Work and Pensions Secretary Liz Kendall said, “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.”