Pensions - Articles - Comments on deadline for 2nd Pensions Commission report

"The Pensions Commission has a once-in-a-generation opportunity to build consensus around the reforms needed to deliver better retirements for millions of people. If it does only one thing, it should recommend increasing minimum auto-enrolment contributions from 8% to 12%.

 

"Auto-enrolment has been one of the UK's biggest public policy successes, but millions of people are still not saving enough and risk reaching retirement with far less income than they expect or need. The Commission provides an opportunity to put this right. We welcome the Commission's focus on helping people turn their pension savings into retirement income. The initial report was relatively negative on the Pension Freedoms, but they should be seen as part of the solution, not the problem.

 

"Retirement is no longer a single cliff-edge moment. More people are working later, phasing their retirement, or moving in and out of work. Pension Freedoms give people the flexibility and control to manage that transition. The priority now should be better support and guidance, with defaults acting as a safety net rather than the first choice for most savers.

 

"The reality, though, is that reforms alone won't move fast enough for everyone. For many people in Generation X, time is running short. More than half are at risk of inadequate retirement incomes, and many could face a serious pension shock unless action is taken. Supporting longer working lives through flexible working, age-inclusive recruitment, better careers support and help for people with health conditions and caring responsibilities must be part of the answer."

 

 

We recommend that minimum automatic enrolment contributions are increased from 8% to at least 12%, bringing the UK closer to levels associated with achieving a ‘Living Pension’ and more in line with international comparators. Over time, there should be a move towards a more balanced contribution structure between employers and employees (for example, a 6/6 split), reflecting a shared responsibility for retirement outcomes.

 

To deliver this sustainably, increases should be:

 

We propose a structured framework to guide decisions on contribution increases, based on a small number of objective economic and labour market indicators. This framework:

 

This approach would ensure progress towards higher contributions while maintaining resilience during periods of economic stress.

 

Maintaining participation will be critical as contribution rates increase. We recommend introducing targeted flexibility within the automatic enrolment system, including:

 

These measures would reduce opt-outs, improve persistency, and support better long-term outcomes, particularly for lower and moderate earners.

 

We support the full implementation of the 2017 Automatic Enrolment Review, including:

 

These reforms would improve fairness, increase participation, and boost overall contribution levels, particularly for younger and lower-paid workers. At the same time, flexibility must be retained to reflect varying saving capacity across the income distribution.

 

Delaying increases in contribution rates would significantly reduce their effectiveness, particularly for those closer to retirement. While younger savers benefit most from early action, older cohorts (especially Generation X) face the greatest losses from delay, with a rapidly narrowing window to improve adequacy. Without clearer support and earlier warning, many in this cohort risk experiencing a “pension shock” as they approach retirement decision-making and discover that their expected retirement income is materially lower than anticipated. Early and decisive action is therefore essential.

 

Investment returns are a critical determinant of retirement outcomes. The Commission is right to emphasise the importance of net returns and long-term value. We support the implementation of a robust Value for Money framework that:

 

Greater scale and more diversified investment strategies can significantly improve saver outcomes, while also unlocking substantial investment in UK productive assets, supporting economic growth, productivity, and innovation.

 

Employers play a critical role in supporting pension saving. While there is broad support for higher contributions, this must be balanced with affordability and implemented through a clear, phased, and well-signalled roadmap. Contributions should be considered as part of total remuneration, ensuring alignment with wages, labour market conditions, and business sustainability.

 

Stable and effective incentives, particularly tax relief, are essential to maintaining engagement with pension saving. Policy certainty is critical, and frequent changes risk undermining confidence and distorting behaviour. We also support greater alignment between regulatory regimes to reduce inefficiencies and ensure that the system consistently promotes long-term outcomes for savers.