The need for a pensions policy review

The time is ripe for a comprehensive review of pensions policy.

The economic and policy environment is hugely different from when Lord Turner’s Pensions Commission reported in 2005. The UK has seen a global financial crisis, a COVID-19 pandemic and, most recently, the highest levels of inflation in almost 40 years. Interest rates (at least until mid 2022) have been at historically low levels, homeownership rates have fallen, and there has been a large rise in self-employment with the growth of the gig economy. All of these have consequences for how people are – or should be – saving for retirement.

Policy-wise, the key recommendations of the Pensions Commission were implemented: a more generous state pension, at least for now; a higher state pension age; and automatic enrolment of most employees into workplace pensions. And they were implemented with much success. But the Pensions Commission did not foresee the triple lock, the New State Pension, pension freedoms, and reductions to the generosity of the working-age benefit system, amongst other reforms.

Given the scale of these changes, there has been a dangerous lack of strategic oversight of the retirement saving system since the Pensions Commission disbanded. There is a clear risk that much better outcomes for pensioner incomes in recent years compared with earlier decades could be fuelling complacency that future generations of pensioners will achieve similarly good – or even better – outcomes. It is in this context that we launch the Review.