Challenges for the UK pension system_ the case for a pensions assessment

Government abstract

This report makes the case for a brand new assessment of the pension system within the UK. There are a variety of key challenges going through future generations of pensioners that threaten their dwelling requirements in retirement and which, with out coverage motion, imply many are more likely to face substantial monetary difficulties in older age. That is the primary report of a multi-year venture that may produce the highest-quality proof relating to the way forward for monetary safety in retirement. The launch of our ultimate report, which can embody particular coverage suggestions and choices, is deliberate for early Summer season 2025.

Key findings

1. Many workers are solely saving little or no for retirement. Virtually a fifth of working-age non-public sector workers (round 3.5 million folks) don’t do any pension saving in a given 12 months. That is significantly true of low earners who’re beneath the brink for automated enrolment. Maybe extra regarding, most of these taking part in a pension save low quantities. 61% of the middle-earning non-public sector workers who’re contributing to a pension are saving lower than 8% of their earnings, and 87% are saving lower than the 15% which might be extra in step with what Lord Turner’s Pensions Fee thought applicable

2. Fewer than one-in-five self-employed employees are saving in a pension. This compares with round a 3rd when the Pensions Fee reported. That is significantly regarding given the expansion in self-employment and that the decline in pension membership among the many self-employed is biggest amongst those that have been self-employed for an extended interval, and that those that do save in a pension usually save comparatively low quantities that stay fastened in money phrases over quite a lot of years.

3. Most non-public sector pension participation is within the type of outlined contribution pensions which go away people bearing dangers which can be tough to handle nicely. Relative to outlined profit preparations, they do provide members way more flexibility. However not like in outlined profit plans, there is no such thing as a risk-sharing with employers, different members or different generations. The fraction of personal sector workers taking part in an outlined profit pension halved from 24% in 2005 to 12% in 2020.

4. Rising numbers approaching retirement stay in dearer, insecure, non-public rented lodging. At age 65, solely 3–4% of these born within the Thirties and Nineteen Forties lived in non-public rented housing, in contrast with 6% for these born within the Nineteen Fifties and with what appears to be like more likely to be 10% for these born within the Sixties. This share could possibly be even greater for youthful generations, resulting in a mixture of a low lifestyle in retirement and larger reliance on housing profit.

5. Larger state pension ages are a coherent response to the challenges of elevated longevity at older ages, however they pose difficulties for a lot of and longevity enhancements haven’t been as large as predicted a decade in the past. The upper state pension ages rise, the more durable it is going to be for some to stay in paid work till that age. Amongst these of their late 60s, 35% of males and 40% of girls are disabled (i.e. have a longstanding well being situation that has a considerable adverse impact on their day by day life). These charges rise to 43% and 46% respectively for these with low ranges of formal schooling. A better state pension age additionally pushes up earnings poverty charges amongst these of their mid 60s, partially as a result of the working-age profit system is much less beneficiant than the help obtainable for pensioners. For instance, the rise in state pension age from 65 to 66 led to a greater than doubling of the earnings poverty fee for 65-year-olds.

6. Demographic and different pressures imply that spending on state pensions and different advantages for pensioners is already projected to rise by £100 billion a 12 months by 2070, with even greater will increase in well being and social care spending. If the state pension age is elevated as legislated, the share of adults over the state pension age is projected to rise from 24% at present to 27% in 2050 and 30% in 2070. The newest projections from the Workplace for Price range Accountability are for state spending on funds to pensioners to rise from 5.6% to 9.6% of nationwide earnings over the following 50 years; this improve is equal to £100 billion a 12 months in at present’s phrases. The UK is, nevertheless, in a greater fiscal place on this problem than many western European international locations, with much less public spending on state pensions and extra beneficial demographic traits.

7. These retiring with outlined contribution pension pots face appreciable problem and threat in managing their funds by means of retirement. The rising prevalence of outlined contribution pensions, mixed with pension freedoms, signifies that many will be capable to draw their pension flexibly by means of their retirement. However selections round how to attract down pension wealth are high-stakes and can should be made with care. At present, a person aged 66 is anticipated to stay for an extra 19 years, however 13% can anticipate to outlive till age 95; the equal figures for 66-year-old ladies are 21 years with 20% making it to age 95. There are dangers of working out of personal sources or of being so cautious as to finish up struggling a needlessly austere retirement. Whereas pension freedoms do give folks the chance to take management of their very own funds, even for probably the most numerate the selections on how to attract on their pension wealth by means of their retirement are tough.

8. Whereas present pensioners are nonetheless doing nicely on common, and lots of the suggestions of the Pensions Fee have been efficiently carried out, the long run appears to be like dangerous at finest for a lot of present employees hoping for a snug retirement. The final 20 years have seen the continued decline of outlined profit pensions within the non-public sector, the abolition of state earnings-related pensions, low rates of interest, falling homeownership, low common contributions to outlined contribution preparations, the introduction of pension freedoms which supply flexibilities however scale back the extent of risk-sharing in retirement, and a collapse in pension saving among the many self-employed. We’d like a significant assessment of pension provision now with the intention to give us an opportunity of avoiding a future that appears worse than the current.

1. Introduction

Planning for retirement is tough. To get it proper, people needn’t solely to take inventory of their present monetary place but additionally to take an knowledgeable view over quite a lot of future elements, round all of which there will likely be a lot uncertainty. These embody after they anticipate to retire, the possibilities that well being issues or an absence of applicable jobs may stop them from working as much as that age, how a lot they’ll earn as much as retirement, what charges of return they could be capable to obtain on any financial savings, what their spending wants will likely be as much as retirement and the way these wants may evolve by means of retirement, and the way lengthy that retirement will likely be. And getting it proper issues: on the present state pension age of 66, on common males are at present anticipated to stay for one more 19 years and ladies for one more 21 years, so the implications of getting underprovided for retirement will be substantial and have long-lasting results.[1]

Appropriately, quite a lot of large public insurance policies are in place to attempt to assist people get this proper. Over half of spending on welfare funds, the largest of which is the state pension, goes to pensioners (£151 billion out of £254 billion forecast in 2023–24, with £125 billion being spent on state pensions (Division for Work and Pensions, 2022a)). The dimensions of those funds signifies that for about half of those that not too long ago reached the state pension age, at the very least half of their earnings is from state sources (Division for Work and Pensions, 2022b). State help in retirement is especially essential for ladies, and for many individuals from ethnic minorities. The rest of pensioner earnings is basically comprised of personal pension earnings. Right here authorities additionally has an essential influence on provision, each when it comes to rules – such because the requirement for employers to enrol most of their workers right into a office pension mechanically – and when it comes to the tax therapy of pension saving, which for a lot of people is comparatively tax-favoured (Adam et al., 2023). However getting these insurance policies proper can also be tough and – given their scale, and the problem they’re making an attempt to fulfill – vastly essential.

And it isn’t simply pensions that matter for sources in retirement. Some folks will accumulate financial savings in different types. Rising numbers are remaining in paid work past the state pension age. Some may anticipate to obtain substantial inheritances. Notably essential is the function of housing: virtually 80% of present pensioners are owner-occupiers who’ve paid off their mortgage in full and subsequently have few housing prices aside from repairs and restore.

When contemplating insurance policies round boosting retirement incomes, there are two fairly separable points. The primary pertains to the state of affairs of present generations of pensioners. To enhance their incomes, there could also be a comparatively restricted set of coverage choices past rising the generosity of state transfers or lowering taxes – most clearly in instances the place there may be little or no scope for people to spice up their non-public incomes by means of returning to paid work. The second problem pertains to the seemingly state of affairs in retirement of future generations of pensioners. Right here there could also be a wider scope of potential choices: elevated state pensions, elevated non-public saving (in pensions or in different types) whereas working, and delayed retirements would all be methods of boosting the sources that might be obtainable in retirement.

Circumstances of present retirees

There’s a lot to have fun when wanting on the incomes of present pensioners. For over a decade, the common (median) incomes of these over state pension age have, as soon as prices of youngsters and variations in housing prices are accounted for, beenalmost an identical to the common incomes of these below state pension age, as proven in Determine 1. As a gaggle, pensioners are actually much less seemingly than common to be in relative earnings poverty, with a fee of 18% simply earlier than the pandemic, in contrast with 31% for households with youngsters.

Determine 1. Actual median family disposable earnings (£ per week, 2020–21 costs) and relative earnings poverty charges, after accounting for housing prices

Word: Incomes measured as internet family equivalised incomes, deducting housing prices, and expressed in 2020–21 costs. Relative earnings poverty outlined as earnings lower than 60% of up to date median earnings.

Supply: Authors’ calculations utilizing the Household Assets Survey, 1995–2020.

That is in sharp distinction to earlier years. All through the Sixties, Nineteen Seventies and Nineteen Eighties, common pensioner incomes have been round 70% of the common incomes of these beneath the state pension age. And pensioner earnings poverty charges all through this era have been usually extraordinarily excessive, with relative poverty charges of pensioners usually working above 35%. This was proof of a transparent failure of state and personal pension insurance policies to ship the retirement incomes that many would anticipate.

That isn’t to say that enhancements for present pensioners should not potential. To present one apparent instance, official estimates counsel that one-in-three pensioners who’re entitled to the means-tested pension credit score should not taking it up, with this being true of one-in-four of the lowest-income pensioners (Division for Work and Pensions, 2022c). Round one-in-six pensioners should not taking on housing profit to which they’re entitled. Given this, it’s disappointing that within the Autumn Assertion of November 2022, the federal government pushed again the deliberate merger of pension credit score with housing profit for pensioners, a coverage that’s anticipated to spice up take-up.

The Pensions Fee

The present coverage framework going through pensions within the UK is – to a big extent – the results of the successes of the Pensions Fee. Arrange by the federal government within the early 2000s, the impartial Pensions Fee was chaired by Lord Adair Turner with two different commissioners – Sir John Hills and Baroness Jeannie Drake. The Fee carried out a complete, evidence-based, assessment of the UK pensions system and made quite a lot of proposals designed to enhance the adequacy of retirement saving (Pensions Fee, 2004 and 2005).

Particularly, it proposed:

restoration of the earnings hyperlink for state pension indexation (the fundamental pension had risen roughly in step with costs for the reason that early Nineteen Eighties and had fallen a good distance as a proportion of common earnings), and a long-term transfer in the direction of a flat-rate state pension (away from the earnings-related pension system launched in 1978 and regularly reformed over the succeeding 25 years);

the primary common will increase within the state pension age for the reason that first UK state pension was launched in 1909 (when it could possibly be acquired from age 70);

and, maybe most radically, the nationwide introduction of a requirement for employers to enrol most workers right into a office pension, with a requirement for employers to make at the very least a minimal quantity of pension contributions so long as the worker doesn’t select to choose out of the association.

The Pensions Fee was profitable when it comes to constructing a large consensus for its suggestions, which is especially worthwhile in pensions coverage because of the long-term nature of the selections and outcomes to which it relates. Following the Fee’s ultimate report in 2005, the suggestions have been legislated by the then Labour authorities they usually have remained intact – and in some instances surpassed – by means of the next coalition authorities and subsequent Conservative governments.

So how are we faring now in relation to those suggestions? The state pension has elevated at the very least as quick as each costs and earnings, with this set to proceed below the triple lock[2] . The state pension age has been elevated to 66 for each women and men, with laws in place to extend it to 67 between 2026 and 2028 and to 68 between 2044 and 2046. Automated enrolment was rolled out nationwide between 2012 and 2018. As proven in Determine 2, this has been extremely profitable in boosting office pension membership amongst non-public sector workers. In 2011 round 42% of personal sector workers within the automated enrolment goal group have been a member of a office pension, and this proportion had been falling over time. However that determine has been at 86% since 2019 (Division for Work and Pensions, 2022d). For the primary time, non-public sector workers have office pension participation charges that aren’t far beneath these of public sector workers. This can be a exceptional turnaround in below a decade. It’s clear that the Pensions Fee has been vastly profitable in shaping the pensions coverage panorama of the UK because it reported in 2005.

Determine 2. Proportion of workers within the automated enrolment goal group taking part in office pensions, cut up by sector

Word: Eligible workers solely.

Supply: Desk 1.1 in Division for Work and Pensions (2022d).

Financial and coverage modifications for the reason that Pensions Fee

It has now been near 20 years for the reason that ultimate report of the Pensions Fee in 2005. There have been substantial modifications over this era that might not have been foreseen by the Fee. Many of those modifications give us causes to fret about future generations of pensioners. The worldwide monetary disaster of 2008 hit the UK economic system, producing the biggest recession for the reason that Nineteen Twenties. Within the decade that adopted, rates of interest declined to report low ranges. From a pre-crash peak of 5.4% in June 2007, the yield on 10-year authorities bonds fell to 0.6% simply earlier than the COVID-19 pandemic. It has since risen to three.6% by February 2023, however within the face of inflation at round 10% that could be a critical adverse return in actual phrases (OECD, 2023a). The restoration from the Nice Recession was characterised by anaemic financial development and stagnating dwelling requirements for working-age households. Following the pandemic and subsequent cost-of-living disaster, public debt is now approaching 100% of nationwide earnings in contrast with round 35% of nationwide earnings within the mid 2000s (Workplace for Price range Accountability, 2023). And the Financial institution of England not too long ago revised down its evaluation of the UK’s pattern development to a dismal fee of beneath 1% a 12 months (Financial institution of England, 2023).

Even placing apart monetary crises and pandemics, gradual however persistent modifications in society are more likely to have their very own implications for requirements of earnings in retirement: rising charges of self-employment (at the very least as much as the pandemic – see Determine 7 later and Workplace for Nationwide Statistics (2022a)); the continued shift away from outlined profit pensions amongst non-public sector workers (see Determine 5 later); greater ranges of immigration resulting in rising fractions of people that don’t stay their complete grownup life within the UK (17% of the inhabitants in 2021 have been born overseas, up from 13% in 2011, in accordance with Workplace for Nationwide Statistics (2022b)); and home costs which have risen sooner than earnings significantly in southern England, with ensuing sharp falls in homeownership charges amongst these aged below 40 (Cribb and Simpson, 2018).

Authorities insurance policies have additionally modified in ways in which – seen from 2005 – wouldn’t have been anticipated. The introduction of ‘triple lock’ state pension uprating since 2011, mixed with the low development and financial instability of the final decade, has pushed up the worth of the state pension relative to each earnings and costs (Emmerson, 2020). Vital reductions within the generosity of working-age social safety advantages imply these on the bottom incomes beneath state pension age obtain much less state help than they’d have finished below the system in place previous to 2010 (Bourquin, Norris Keiller and Waters, 2019). New saving merchandise such because the Lifetime ISA, which is perhaps significantly engaging to basic-rate taxpayers whose pension saving wouldn’t be matched by an employer – akin to many self-employed employees – have been launched. And most clearly, the introduction of ‘pension freedoms’ from April 2015 has remodeled how the hundreds of thousands of individuals with outlined contribution pension pots are ready to attract their earnings in retirement. Additional modifications are actually deliberate, with the federal government not too long ago asserting it might help a non-public members’ invoice that would cut back the beginning age for automated enrolment to 18 (from 22) and, seemingly extra considerably, transfer to a system the place automated enrolment contributions begin on the first pound of earnings fairly than earnings above the decrease earnings restrict, at present £6,240 per 12 months (Division for Work and Pensions, 2023b).

On the premise of considerable financial and coverage modifications since 2005, it’s excessive time for a brand new strategic assessment of the UK pensions system. We’re not the one individuals who suppose so. Certainly, in 2020, right-of-centre suppose tank Shiny Blue alongside left-of-centre suppose tank the Fabian Society made a ‘cross-party’ name for a brand new Pensions Fee (Shorthouse, Harrop and Robinson, 2020).

However we expect that the case is far stronger than merely the truth that a very long time has handed for the reason that Pensions Fee. The comparatively robust efficiency of retirement incomes over the course of the final decade could possibly be breeding complacency amongst policymakers with our pensions system. With out coverage motion, the monetary safety in retirement for future generations of pensioners will not be fairly so rosy: latest traits amongst pensioners might nicely not proceed and certainly might reverse. Within the subsequent part, we doc a few of the key details and traits that we expect collectively make the case for a brand new Pensions Evaluate.

2. Challenges going through future generations of pensioners

In contrast with many different international locations in western Europe and Scandinavia, many pensioners within the UK are relianton non-public sources, significantly by means of non-public pensions offered or facilitated by their former employers. The near-universal New State Pension, which is payable to those that reached the state pension age from April 2016, supplies a flat-rate pension that’s virtually the identical no matter how a lot was earned in working life. Since 6 April this 12 months, it has been set at £203.85 per week. At round 30% of median earnings, it’s extra beneficiant relative to common earnings than the fundamental state pension has been at any level in its existence (the fundamental state pension climbed to virtually 30% of median earnings in 1979, simply previous to the earnings hyperlink being damaged in 1980). However even at this stage, center and excessive earners would see a giant drop of their lifestyle at retirement if they didn’t accumulate non-public wealth throughout their working life, most clearly by means of a non-public pension.

As proven within the final part, automated enrolment has been very profitable in boosting office pension participation amongst goal workers to excessive ranges by historic requirements. However this nonetheless leaves vital numbers of workers who should not enrolled in a office pension. Determine 3 reveals the share of all non-public sector workers, by earnings, who’re taking part in such an association. It reveals significantly decrease enrolment charges for these below the automated enrolment threshold of £10,000 per 12 months – solely 44% of these incomes £5,000–£10,000 per 12 months participated in a pension in 2019. This compares with 87% of these round median earnings (£25,000 to £30,000) and 92% of these incomes simply over £50,000. Cribb, Karjalainen and O’Brien (2023) present that decrease pension protection amongst these incomes beneath £10,000, mixed with the truth that ladies are more likely to be decrease earners than males, is one key driver of girls’s non-public pension participation being decrease than that of males.

Determine 3. Pension participation of personal sector workers, by annual earnings, 2019

Supply: Authors’ calculations utilizing the Annual Survey of Hours and Earnings, 2019.

As well as, amongst workers who do take part in a non-public pension plan, the minimal default contributions required for mechanically enrolled workers are low and there are ensuing issues that many will not be saving sufficient for retirement (Division for Work and Pensions, 2023a). Whole contributions should be at the very least 8% of ‘qualifying’ earnings between £6,240 and their wage stage (or £50,270 for these incomes greater than that). For a median full-time earner in April 2022 (£640 per week), this may imply pension saving of 6.5% of their complete earnings. This doubtlessly leaves many with very low ranges of contributions. Determine 4 reveals the shares of working-age non-public sector workers who’re taking part in a office pension who’ve complete contributions – i.e. each their very own contributions and people made by an employer on their behalf – of lower than 15%, lower than 8% and fewer than 5% of complete earnings.

Determine 4. Proportion of personal sector workers saving in a pension who’ve complete office pension contributions lower than 15%, 8% and 5% of pre-tax earnings, 2019

Word: Consists of non-public sector workers aged 22–64 who’re an lively member of a office pension.

Supply: Authors’ calculations utilizing the Annual Survey of Hours and Earnings, 2019.

Virtually all (82%) non-public sector pension members have contributions of lower than 15% of earnings (and 87% of center earners), roughly the extent that the Pensions Fee judged many ought to intention to be saving for retirement[3]. Even amongst the highest-earning fifth, 70% have contributions of lower than 15%. Simply over half (53%) of personal sector workers contributing to a office pension have complete contributions of lower than 8% of complete earnings, and round one-in-six (17%) have lower than 5%. The fraction with low contribution charges is far greater amongst low earners, seemingly partially as a result of for them qualifying earnings are a smaller share of their complete earnings, however even for center earners six-in-ten (61%) have contributions of lower than 8% of earnings.

A key distinction between excessive earners and people on center or decrease earnings is the function performed by employer contributions. Determine A1 within the appendix reveals that greater earners make greater particular person contributions (as a proportion of their – greater – salaries) but additionally obtain significantly extra in employer contributions, averaging over 8% of complete earnings for the highest-paid fifth from employer contributions alone, in contrast with 5% for the middle-earning fifth and fewer than that for the bottom earners. These employer contributions are significantly tax-favoured as they escape each employer and worker Nationwide Insurance coverage contributions solely.

All in all, saving sufficient for retirement seems to be a difficulty for a lot of non-public sector workers, significantly these on common earnings, who should not so poor that the state pension would offer an sufficient substitute fee, however should not excessive earners who usually tend to obtain greater employer contributions and to build up substantial ranges of pension and different kinds of wealth. We’re not alone within the concern for center earners (particularly) undersaving for retirement, with this concern underlying varied proposals, together with the ‘Dwelling Pension’ marketing campaign (see Cominetti and Odamtten (2022) for an evaluation of whether or not employees’ pension saving meets this stage) and the PLSA’s work on the Retirement Dwelling Requirements (e.g. Pensions and Lifetime Financial savings Affiliation, 2023).

In fact, that is solely a snapshot of pension saving. Seeing many workers making low charges of contributions in a given 12 months won’t be regarding if it have been the case that they tended to make very giant contributions on an rare foundation. Certainly, such behaviour is perhaps applicable: we’d anticipate people to save lots of giant quantities throughout instances when their incomes have been significantly excessive and/or their spending wants significantly low. However proof from wanting on the pension saving behaviour of the identical workers over time means that the share of earnings saved tends to not range a lot at throughout time, and is mostly unresponsive to modifications in pay, up-front tax incentives or modifications in people’ lives akin to having youngsters or paying off a mortgage (Cribb and O’Brien, 2023).

It isn’t solely the money quantity getting into pensions for personal sector workers that’s regarding. The entire rise in pension participation for personal sector workers that has occurred for the reason that introduction of automated enrolment has come within the type of outlined contribution pension plans, as proven in Determine 5. Outlined contribution (DC) plans, because the identify suggests, are plans the place the employer and worker agree set contribution charges for pension saving, and the worker will on this approach construct their pension funding pot and may resolve entry it later in life. There’s, subsequently, no promise of the pension earnings these pots will present. This contrasts with outlined profit (DB) plans, the place the employer makes a promise of a stream of earnings in retirement (till loss of life). Workers should make a set contribution with the intention to be a member of the association, and employers will then prime this contribution up with what’s deemed to be wanted to make sure that the plan as an entire is appropriately funded to fulfill its obligations.

Determine 5. Proportion of personal sector workers taking part in outlined profit and outlined contribution office pensions

Word: Personal sector workers aged 22–59.

Supply: Authors’ calculations utilizing the Annual Survey of Hours and Earnings, 1997–2020.

The info from 2020 present that 69% of working-age non-public sector workers save in a DC pension (66% of girls, 72% of males) and simply 12% (identical for each women and men) in a DB plan. A lot of these exterior the general public sector who’re enrolled in a DB association will likely be members of the big college DB plan (the Universities Superannuation Scheme, USS). Taking a look at non-public sector workers – however excluding non-profit establishments akin to universities – DB pension participation was simply 7% in 2021 (Workplace for Nationwide Statistics, 2022c), in contrast with round 30% within the early Nineties and 35% within the early Nineteen Eighties (Pensions Fee, 2004). DC pensions can present people with plenty of flexibility over how a lot to contribute, the place these funds are invested, and the way they’re decumulated by means of retirement. However – at the very least formally – in addition they expose members to way more threat, particularly when it comes to funding return and longevity, than DB pensions.

Concurrently the shift from DB to DC preparations transferred funding threat from employers to workers, asset returns have fallen to traditionally low ranges. The eventual dimension of a person’s pension pot will rely solely on the contributions made throughout working life and the returns on these contributions over time.

With a purpose to perceive the dimensions of the modifications in potential charges of return on investments for the reason that Pensions Fee reported, we are able to take a look at the utmost charges of return that the Monetary Conduct Authority (FCA) permits monetary companies corporations to make use of within the calculations they current to retail prospects (Monetary Conduct Authority, 2017). Within the context of pension saving, these charges can assist customers get a way of the retirement earnings they could anticipate. The ceiling on projected charges of return goals to forestall customers being misled by inappropriately excessive charges.

These prescribed charges of return have been reviewed by PwC in 2003, 2007, 2012 and 2017, with the intention to assess whether or not they have been nonetheless applicable given market situations on the time. On account of these critiques, in 2014 the FCA decreased the utmost nominal fee of return that can be utilized for projecting future advantages from non-public pensions from 7% to five%, in step with PwC’s suggestions.

Determine 6 illustrates modifications within the underlying charges of return that PwC utilized in arriving at its suggestions, in contrast with the charges of return assumed by the Pensions Fee in its modelling of future pension incomes. The charges assumed by PwC give a way of what the FCA thinks are wise projections for long-term asset returns below the market situations on the time. Determine 6 clearly illustrates that the returns assumptions used within the Pensions Fee modelling are not relevant – the true charges of return assumed by the Pensions Fee have been 2.5 proportion factors (ppt) greater for presidency bonds, 2.4 ppt greater for company bonds and a pair of.0 ppt greater for fairness markets than PwC’s newest central projections.

Determine 6. Modifications in projected actual charges of return over time, in contrast with Pensions Fee assumptions

Word: Pensions Fee assumptions are the base-case assumptions for modelling future incomes. PwC projections are from the assessment of prescribed charges of return assume mid-point of the vary offered.

Supply: Pensions Fee, 2004; Monetary Providers Authority, 2012; Monetary Conduct Authority, 2017.

Each traditionally and in the meanwhile, employer contributions into DB plans are typically considerably greater than these into DC pensions; certainly, one key purpose why non-public sector employers have shifted from offering DB to as a substitute providing DC preparations is in order that they will scale back their anticipated pension contributions, in addition to their publicity to the chance that these contributions might should range considerably over time. As well as, wanting over an extended interval (fairly than only a snapshot) might introduce specific worries relating to the decline of DB pensions and the (later) rise in DC preparations. For instance, the Work and Pensions Choose Committee (2022) argues that we needs to be significantly – however not solely – involved about working-age folks of their 40s (and older) who had restricted alternatives to affix DB pension plans, but additionally have had much less time previous to retirement to construct up vital DC pension wealth in contrast with youthful generations who will save in DC preparations over an extended interval.

Challenges from the labour market

On prime of low contributions being made by many non-public sector workers below automated enrolment, there are additional key challenges stemming from the labour market. Determine 7 reveals there have been substantial will increase in self-employment within the UK, at the very least within the run-up to the pandemic. On the identical time, the variety of self-employed employees who’re saving in a office pension halved from 1.6 million (46% of the self-employed) in 1998 to 1.2 million (32%) when the Pensions Fee reported in 2005 to solely 0.8 million in 2019 (17%) at a time when the self-employed workforce grew by 1.4 million folks. This can be a exceptional decline. The variety of self-employed folks fell again in 2020 on account of the pandemic, although the fraction saving in a pension remained virtually unchanged, at 18%. General, we’ve got many extra self-employed than within the late Nineties doing, in mixture, far much less pension saving. Furthermore, it doesn’t seem that different monetary property are performing as an alternative to pension saving among the many self-employed. Crawford and Karjalainen (2020) discover that during the last 20 years the proportion of people saving in both a pension, financial savings account, ISA or shares declined, and extra quickly for the self-employed than for workers.

Determine 7. Variety of self-employed folks taking part, and never taking part, in a non-public pension

Supply: Authors’ calculations utilizing the Household Assets Survey, 1998–2020.

Had been these patterns pushed by a rise in those that are solely self-employed for a brief interval – who may subsequently save comparatively greater quantities in different years after they have been conventionally employed – then these traits won’t be so regarding. However proof introduced by Crawford and Karjalainen (2020) means that the sharp drop within the pension saving fee among the many self-employed during the last 20 years is especially giant among the many long-term self-employed (that’s, those that have been self-employed greater than seven years, which is about half of the self-employed). Furthermore, there may be proof that the self-employed who do contribute to a pension usually go away their contributions unchanged for prolonged intervals: one-in-two contribute the identical money quantity in a single 12 months because the final, and remarkably one-in-four contribute the identical money quantity as 9 years earlier (Cribb and Karjalainen, 2023). It’s also the case that, significantly for middle-earnings self-employed savers, the quantities positioned in a pension are typically low in contrast with the pension contributions made by workers, or by their employers on their behalf, on related incomes.

The mixture of the expansion of the self-employed, the precipitous fall in pension saving charges among the many self-employed, and the persistently low contributions amongst lots of the self-employed who do save in a pension, acts to push up the variety of working-age people who find themselves more likely to rely primarily on state, fairly than non-public, pensions for earnings in retirement.

Challenges from the housing market

Points within the housing market additionally threaten to play an more and more problematic function within the adequacy of retirement incomes. A lot of the controversy round modifications in housing tenure has targeted on declines in homeownership charges amongst youthful adults – which have been significantly sharp amongst center earners. However when interested by future retirement sources, it’s extra instructive to have a look at the fraction of people who find themselves dwelling in non-public rented lodging. Most owner-occupiers repay their mortgage by retirement, and subsequently face low housing prices thereafter. However as well as, folks dwelling in social housing face low rents which are sometimes absolutely coated by housing profit (and certainly for these in social housing who’re deemed to have extra bedrooms than they want, their means-tested housing help can improve after they attain the state pension age as that restriction solely applies to working-age people). The extra urgent concern is the rising variety of non-public renters approaching older ages – non-public rents are comparatively excessive and sometimes have insecure tenancies which will be significantly unsuitable for older folks with a number of well being and/or mobility points.

Determine 8 reveals that for these born within the Thirties and Nineteen Forties lower than 5% of the inhabitants have been non-public renters of their late 60s and early 70s, whereas amongst these born within the Nineteen Fifties solely 6% have been non-public renters of their mid 60s. These are the charges of personal renting seen amongst retirees in the meanwhile. For these born within the Sixties, the fraction who’re non-public renters has been caught at 10% for round three a long time and, now of their mid 50s, reveals no clear indicators of falling. So we’d anticipate the share reaching retirement whereas in non-public rented lodging to double over the following decade.

Determine 8. Proportion of individuals dwelling in non-public rented lodging, by age and decade of beginning

Word: Age is median age of the era within the 12 months of commentary.

Supply: Authors’ calculations utilizing the Household Assets Survey and Household Expenditure Survey, 1968–2019.

The potential for greater charges of personal renting amongst these approaching retirement is even larger for youthful generations, although there may be significantly extra uncertainty about how these patterns will evolve for them. Amongst these born within the Nineteen Seventies, of whom about 18% have been in non-public rented lodging by the point they reached their mid 40s, it might not be shocking if charges remained round 15%. General, these traits imply a rising fraction of the inhabitants must save for a retirement that features paying lease every month. This may even have direct implications for state help as a part of these rents will seemingly be coated by housing profit.

One pattern that may counteract or mitigate that is the rising anticipated significance of inheritance for youthful generations. Cribb (2019) reveals that of these born within the Nineteen Forties, slightly below a 3rd acquired an inheritance, whereas over two-thirds of these born within the Nineteen Seventies have acquired, or anticipate to obtain, an inheritance. The common age of receiving an inheritance is anticipated to be 62 for these born within the Nineteen Seventies (Bourquin, Joyce and Sturrock, 2020), which means that some non-public renters might be able to buy a house outright later in life following the receipt of an inheritance. Nonetheless, two elements which will restrict the flexibility for this to play a considerable function will likely be the truth that comparatively few will inherit to buy a house outright and those that are almost certainly to obtain vital inheritances are more likely to be richer themselves, and subsequently more likely to be already owners.

Challenges ensuing from modifications in public coverage

There are additionally new challenges that come from modifications to public coverage. As famous earlier, there have been quite a lot of vital coverage modifications within the early and mid 2010s which can be significantly related to retirement saving. Maybe most evident is the state pension age, which rose for ladies from 60 to 65 between 2010 and 2018 and subsequently from 65 to 66 for women and men between 2018 and 2020. Proof reveals {that a} vital variety of ladies and men responded to the reform by delaying their retirement (and thereby sometimes boosted their earnings by greater than the state pension they’ll have misplaced). It additionally reveals that almost all didn’t modify their labour market exercise in response to the reform and subsequently the reform decreased their weekly earnings – sometimes by an even bigger share amongst low- and middle-income households who’re often extra reliant on the state pension (Cribb, Emmerson and O’Brien, 2022; Cribb and O’Brien, 2022). Extra usually, the numerous will increase in the true worth of the state pension over time, and reductions to the generosity of the working-age profit system, have made the state pension age more and more essential as a degree when monetary circumstanceschange.

Determine 9 reveals the evolution over time of the share of males (strong strains) and ladies (dashed strains) in paid work at older ages. The rise within the employment fee arising in response to the rise within the state pension age will be seen by the sharp improve within the proportion of girls aged 60–64 in paid work between 2010 and 2018 (i.e. the interval wherein the feminine state pension age rose from 60 to 65). However the autumn in employment – and improve in financial inactivity – seen for the reason that pandemic, it’s clear that the employment fee of older ladies continues to be near report ranges.

Determine 9. Proportion of individuals aged 55–59, 60–64 and 65–69 in employment, by intercourse

Supply: Authors’ calculations utilizing the Labour Power Survey, 1975–2022.

The employment fee for 65- to 69-year-old males, and that for ladies of the identical age, are additionally traditionally excessive. Which means an rising quantity obtain earnings from each the state pension and employment. Amongst older males aged 55–59 and 60–64, employment charges have usually been rising since across the mid Nineties, however the sharp falls seen within the first half of the Nineteen Eighties imply that their employment charges have solely recovered to the degrees seen across the begin of that decade. That is significantly exceptional contemplating that, on common, males aged 55–64 within the late Nineteen Seventies can have been in worse well being – and sometimes working in additional bodily demanding industries – than males on the identical ages at present (Banks, Emmerson and Tetlow, 2019).

Regardless of the rise in employment charges occurring in response to will increase within the state pension age, the truth that many individuals don’t reply, mixed with the truth that since 2010 the working-age profit system has been made much less beneficiant relative to the state pension system, has led to rising numbers approaching the state pension age being on low family incomes. Determine 10 reveals this by displaying relative family earnings poverty charges for women and men aged of their late 50s and early-to-mid 60s since 2009.

Determine 10. Relative earnings poverty charges (after deducting housing prices), by age and intercourse

Word: Relative earnings poverty outlined as earnings lower than 60% of up to date median earnings, after adjusting for variations in housing prices.

Supply: Authors’ calculations utilizing the Household Assets Survey, 2009–20.

Amongst ladies, it’s clear that the poverty fee of these aged 60–64 elevated between 2010 and 2018 – when the feminine state pension was elevated from 60 to 65 – whereas charges at older and youthful ages (and subsequently circuitously affected by the rising state pension age) have been extra steady. Then, between 2018 and 2020, there’s a sharp rise within the poverty fee amongst 65-year-old ladies concurrently their state pension age rose from 65 to 66. This latter impact can be seen amongst males: the poverty fee amongst 65-year-old males rose sharply between 2018 and 2020 (i.e. when their state pension age additionally rose from 65 to 66). A extra formal statistical check was finished by Cribb and O’Brien (2022) they usually discovered the rise within the state pension age from 65 to 66 pushed up the poverty fee amongst 65-year-olds by 14 proportion factors. These traits beg the query: ‘To what extent can, or ought to, the federal government act to help these on low incomes of their 60s, who beforehand would have been eligible for a state pension, significantly those that are unable to work – for instance, resulting from having work-limiting well being situations?’.

The shares categorized as disabled (i.e. having a longstanding well being situation that has a considerable adverse impact on their day by day life), by age, intercourse and schooling stage, are introduced in Determine 11. They improve from the late 30s onwards, and are greater for ladies than for males. Amongst these of their late 60s, 35% of males and 40% of girls are disabled. There’s additionally a really sharp gradient with schooling ranges: at every age, these with decrease ranges of formal {qualifications} have greater charges of incapacity. For instance, taking these of their late 60s who’ve at most a GCSE qualification (or equal), 43% of males and 46% of girls are disabled. In distinction, incapacity charges are a lot decrease amongst these with a level qualification. In consequence, for each women and men, incapacity charges amongst these with a level of their late 60s are just like these seen amongst these with at most GCSE {qualifications} who’re 30 years youthful.

Determine 11. Proportion of people who find themselves disabled, by age, intercourse and schooling, 2022

Word: Incapacity is measured in step with the definition of the Equality Act 2010 as having a bodily or psychological impairment that has a considerable and long-term adverse impact on one’s capacity to do regular day by day actions.

Supply: Authors’ calculations utilizing the Labour Power Survey, 2022.

Pensions and public funds

The important thing rigidity right here, after all, is that the rise within the state pension age is designed to scale back family dependence on the state for folks of their late 60s, and from a public finance perspective itis a coherent response to rising life expectancy at older ages. Any additional monetary help for affected households would cut back the general public finance advantages of a better state pension age. As is proven in Determine 12, the general public finance pressures of ageing, together with the state pension, are substantial. The graph assumes that the triple lock stays in place and that state pension age rises to 67 by 2028, to 68 by 2039 (below prior plans to deliver it ahead from 2046 which have now been pushed again – see Cribb et al. (2023)) and additional will increase past that in step with development in life expectancy.

Determine 12. OBR projections of spending on state pensions and different pensioner advantages, and on well being and social care

Supply: Desk 4.9 of Workplace for Price range Accountability (2022).

The most recent projections from the Workplace for Price range Accountability (2022) suggest that spending on state pensions and different pensioner advantages will stay comparatively flat over this decade, with state pension spending slightly below 5% of nationwide earnings and pensioner profit spending (which incorporates issues akin to housing profit for low-income pensioners dwelling in rented lodging, and attendance allowance for these deemed to have a extreme incapacity) just under 1% of nationwide earnings. However, together, they’ll then rise sharply, by 4% of nationwide earnings, over the next 40 years (collectively reaching 9.6% of nationwide earnings in 2071). A 4% of nationwide earnings rise is equal to about £100 billion a 12 months in at present’s phrases. Recognising this problem, the latest Unbiased Evaluate of the State Pension Age (2023) advised a cap of 6% of nationwide earnings on spending on state pensions (although – oddly – didn’t embody pensioner advantages). Primarily based on the OBR’s evaluation from 2022, with out additional will increase within the state pension age, reductions in generosity of indexation, or different measures, this proposed restrict could be breached earlier than 2051.

The general public finance problem of this spending stress comes alongside the – even bigger – stress positioned by larger want for well being and social care with an more and more outdated inhabitants and rising price pressures over time. The OBR initiatives state spending on well being and social care to rise from 10.3% of nationwide earnings in 2021 to 13.7% in 2051 and 17.5% in 2071. General, this would depart spending on state pensions and pensioner advantages and on well being and grownup social care at 27.1% of nationwide earnings in 2071, up 71% from the 15.8% spent in 2021.

The general public finance burden of the ageing inhabitants shouldn’t be shocking given the general demographic modifications within the UK during the last a long time. Determine 13 reveals the fraction of adults (aged 20+) who’re aged 65 or above, and the fraction who’re over state pension age. The fraction of the grownup inhabitants aged 65 or above has risen from 21% to 24% between 2005 and 2020 and it’s projected to rise to 31% in 2050 and 34% in 2070. The fraction who’re over state pension age has really remained remarkably fixed in latest a long time, regardless of the ageing inhabitants, due to rises within the state pension age. In actual fact, the fraction over state pension age in 2020 – at 23.1% – was really decrease than at any level within the final 50 years. Nonetheless, this fraction is projected to extend to 27% in 2050 and 30% in 2070. Until mortality charges are greater than anticipated, then, absent additional will increase within the state pension age, the almost certainly elements that might stop this are greater fertility and/or greater internet inwards migration of working-age adults. As an illustration of the extent to which the inhabitants is ageing, in 2050 a state pension age as excessive as 70 could be required to maintain the share of adults aged over the state pension age at its present fee of 24%.

Determine 13. Proportion of the grownup (aged 20+) inhabitants that’s aged 65 or over, or is aged above state pension age, 1971 to 2020 (out-turn) and to 2070 (projected)

Word: Assumes state pension age rises in step with laws within the Pensions Act 2014 in order that it rises from 66 to 67 between 2026 and 2028 and from 67 to 68 between 2044 and 2046.

Supply: Authors’ calculations utilizing ONS’s ‘Inhabitants estimates for the UK and constituent international locations by intercourse and age: historic time collection’ and ONS’s ‘2020-based interim nationwide inhabitants projections’.

In fact, there may be a lot uncertainty round demographic forecasts: till not too long ago, successive forecasts have tended to revise up life expectancy as enhancements in longevity at older ages proved to be extra persistent than beforehand assumed. However within the final decade, this sample has reversed: whereas longevity continues to be rising, it’s no longer anticipated to extend by as a lot as beforehand assumed.

To place these challenges in context, Determine 14 reveals the significance of state and personal pension earnings, as a fraction of nationwide earnings in 2017, as in contrast with different developed international locations. The determine makes use of a barely totally different definition from Determine 12 (it doesn’t embody money advantages acquired by pensioners aside from the state pension) to help comparability between international locations. Revenue from state and personal pensions varies from 9.0% of nationwide earnings in Australia to 16.8% of nationwide earnings in Italy. The UK is within the decrease half, simply above the Netherlands and just under Germany and Spain. A number of elements will create this variation, most clearly the age construction of the inhabitants.

Determine 14. Private and non-private spending on pension advantages, in EU15 and different main industrialised economies, as a share of GDP, 2017

Word: Personal pension spending is the movement of funds to pensioners, not the contributions made in working life. Nations are ranked by complete spending (private and non-private) as a proportion of GDP. Numbers for Eire are expressed as a proportion of GNP as Irish GDP is 26% greater than GNP resulting from earnings acquired by multinationals.

Supply: Desk 8.4 of OECD (2021). EU15 international locations plus Australia, Canada, Japan and the US. Figures for Luxembourg not obtainable.

State pensions within the UK are a comparatively low 5.6% of nationwide earnings, which is analogous to – however barely above – these in Canada and the Netherlands. The UK, Canada and the Netherlands – together with the US – have comparatively excessive non-public pension incomes. However sometimes the upper non-public pension earnings in these international locations is just not adequate to make up for the decrease earnings from public pensions. The US is an outlier in that it does have a comparatively excessive complete pension earnings regardless of having a comparatively low public pension earnings. The comparatively low public pension earnings within the UK, Canada and the Netherlands, together with that in Australia (the place the state pension is means-tested), is related to decrease general pension earnings. Certainly, lots of the international locations the place complete earnings from private and non-private pensions is a comparatively excessive share of nationwide earnings are likely to have a better proportion of that share from public pensions: in Portugal, Austria, France and Greece, public pension earnings is 95% or extra of complete pension earnings.

The UK system subsequently depends way more on employer and particular person contributions to personal pensions than many international locations. Nevertheless it additionally locations the UK public funds in a greater place to climate the difficulties of an ageing inhabitants. As measured by old-age dependency ratios, the demographic problem can also be much less problematic within the UK than in another international locations (notably Japan, South Korea, Italy and Spain) when it comes to each the projected stage of the old-age dependency ratio in 2075, and its rise between now and 2075, however extra problematic than in youthful international locations (helped by greater fertility and/or immigration) such because the US and Australia (see OECD (2023b)).

Decumulation in retirement

Up to now, we’ve got targeted on the challenges going through folks accumulating sufficient for retirement given the circumstances going through them, the diploma of state help offered to older folks and the price of such help to the general public funds. However no matter the quantity of wealth people method retirement with, and the extent of state help offered, they face essential monetary selections that their predecessors didn’t, because of the rise of outlined contribution pensions, the decline of outlined profit pensions and the introduction of recent pension freedoms.

Till 2014, there was an efficient requirement for most individuals with DC pension pots to annuitise their DC wealth by the age of 75. Nonetheless, in a shock announcement in 2014, the federal government introduced the removing of this requirement. Since 2015, anybody aged 55 or over (57 from April 2028) can draw on their DC pension pot in any approach they like.

Determine 15 reveals the variety of annuity and drawdown purchases utilizing knowledge from the Affiliation of British Insurers (ABI) since 2007. The announcement and introduction of pension freedoms precipitated an infinite decline in annuity purchases, and a smaller rise of pensions in drawdown. Numerous folks have withdrawn pension pots in full, significantly these with lower than £10,000 in a pot (Monetary Conduct Authority, 2022). Annuities present a recognized earnings stream and longevity insurance coverage. In consequence, they could assist people handle their sources by means of retirement: for instance, the entire earnings from an inflation-linked annuity could possibly be spent annually within the data that the identical stage of real-terms spending could possibly be maintained by means of to the tip of life no matter how lengthy that is perhaps. Proof means that such a flat actual profile by means of retirement – fairly than, say, a declining spending profile – may, on common, be applicable (Crawford, Karjalainen and Sturrock, 2022).

Determine 15. Variety of annuity and drawdown purchases

Supply: Affiliation of British Insurers – Quarterly Pension Annuities – 2022Q4 and Quarterly New Lengthy-Time period Enterprise (Pensions) – 2022Q4. Copyright of the ABI.

An additional problem comes from the truth that decumulation selections should be made with respect to what, on common, will likely be a few years of retirement. On the present state pension age of 66, on common males are at present anticipated to stay for one more 19 years (till age 85) and ladies for one more 21 years (till age 87). The problem of constructing good decumulation selections is made more durable by the truth that some will die a lot youthful, whereas others will stay for much longer. This variation is described in Determine 16, which reveals the share of individuals aged 66 in 2023 who’re anticipated to make it to every successive age, cut up between women and men, in accordance with the most recent ONS life tables (2020). The graph reveals that 15% of males, and 10% of girls, alive at age 66 are anticipated to die earlier than age 75. Then again, 32% of males, and 42% of girls, alive at 66 are anticipated to make it to 90, with 13% of males and 20% of girls making it to 95 from 66.

Determine 16. Share of 66-year-olds in 2023 who can anticipate to nonetheless be alive at every age, by intercourse

Supply: Authors’ calculations utilizing UK cohort life expectations, taken from 2020-based life tables (

Pension freedoms permit folks to benefit from extra management over their funds, earnings and expenditure in retirement. And lots of may accomplish that in ways in which make them higher off. However to do that efficiently is more likely to require people to make vital monetary selections at older ages. And doing it fallacious might imply people both spending too little annually and subsequently inappropriately forgoing worthwhile consumption alternatives or spending an excessive amount of and doubtlessly exhausting their sources too quickly. Buying and selling off the chance of overspending out of an gathered pension pot in opposition to the chance of underspending is tough, at the very least with out utilizing the pot to buy an annuity which supplies insurance coverage in opposition to dwelling for much longer than anticipated and, doubtlessly, certainty over the earnings that will likely be acquired in annually till loss of life.

Managing decumulation of pension pots nicely with out the safety offered by an annuity might nicely show difficult for a considerable proportion of the older inhabitants. Even for probably the most numerate folks, selections – taken below an enormous quantity of uncertainty – about using wealth in retirement are immensely tough. And as in lots of international locations (Lusardi and Mitchell, 2011), monetary literacy charges are low within the UK. Moreover, round 30% of individuals of their 70s are recognised as having some type of cognitive impairment, in contrast with lower than 10% of these of their 60s (Cadar, Abell and Steptoe, 2020). All in all, this raises questions of whether or not folks want extra help navigating the chances that pension freedoms present for the construction of personal pension incomes in retirement and whether or not there could be benefits in encouraging people to make selections at youthful ages previous to the onset of cognitive decline.


This part has argued in opposition to complacency relating to the pensions of future generations and their monetary safety in retirement. Most often, challenges are bigger for youthful generations who’re at present farther from retirement: until they work within the public sector, they’re much less more likely to ever have saved in a (extra beneficiant) outlined profit pension; they’re much less seemingly to have the ability to get onto the housing ladder and extra more likely to reside in non-public rented lodging; they’re more likely to face a better state pension age and the additional uncertainty that comes with the ageing inhabitants inserting larger stress on public funds. The pension wealth that they do accumulate in outlined contribution preparations will should be managed rigorously not simply by means of working life but additionally all through outdated age to make sure they profit from the flexibilities of pension freedoms and minimise the possibilities that they make selections they subsequently remorse – or that they draw back from making selections in any respect. However the truth that the biggest challenges are for these furthest from retirement additionally means that there’s larger time, and scope for public coverage, to deal with these challenges and assist safe higher outcomes in retirement for these generations.

3. Introducing the Pensions Evaluate

Confronted with the challenges for the long run generations of pensioners, we’re working with the abrdn Monetary Equity Belief which is funding a significant venture reviewing the UK pension system and the way forward for monetary safety in retirement.

The Pensions Evaluate is a multi-year venture that may comprehensively assess the implications of present pension coverage, the financial surroundings and particular person behaviour for dwelling requirements in retirement. Finally, we’ll present suggestions for reform to enhance outcomes for future generations of pensioners throughout the UK.

The assessment is led by three of the authors of this report: Jonathan Cribb, Carl Emmerson and Paul Johnson. With colleagues at IFS, we’ll systematicallyreview the proof on the challenges going through future pensioners and undertake cautious empirical evaluation to know latest financial traits and the way folks have responded to earlier pension reforms. As well as, we’ll interact with policymakers, employers, commerce unions, these within the pensions trade and different stakeholders representing totally different teams in society to know the important thing challenges and trade-offs.

We are going to work with abrdn Monetary Equity Belief to fee opinion polling and public engagement actions to know how folks from throughout the nation see the challenges of funding their very own retirements, and collect their ideas on potential routes for reform.

The Evaluate will centre on three key questions which we’ll discover in depth:

Are folks saving appropriately for retirement, when it comes to each the quantity and the type of saving, and if not, how can authorities insurance policies assist? How ought to the state help folks from late working life into and thru retirement? Do folks require extra help to make use of their wealth appropriately by means of retirement?

A cross-cutting theme would be the extent to which the dangers positioned on people are ones that they’re nicely positioned to handle, or whether or not there may be extra that others – employers, insurance coverage corporations or authorities – ought to do to help. We may even think about how financial traits and the influence of coverage modifications range throughout totally different folks. For instance, we’ll study how challenges and potential insurance policies would have an effect on folks on totally different ranges of incomes, enterprise several types of work, or dwelling in several elements of the UK. We may even study variations between women and men, and folks of various ethnicities, amongst different traits.

We’re guided by a extremely certified steering group: Alistair Darling (former Chancellor of the Exchequer, and the Chair of the abrdn Monetary Equity Belief), David Gauke (former Secretary of State for Work and Pensions) and Joanne Segars (former CEO of the Pensions and Lifetime Financial savings Affiliation). This senior steering group will present high-level strategic recommendation on the course of the Evaluate and on the deserves and disadvantages of coverage choices that emerge from our work. As well as, we’ll interact with stakeholders in a collection of advisory teams reflecting a variety of opinions and pursuits from throughout the general public, non-public and third sectors.

Preliminary findings will likely be revealed over the following two years, with the primary essential report anticipated in Autumn 2023. We plan to publish our key findings and suggestions for reform at launch occasions in London and Edinburgh in early Summer season 2025. Following this, we’ll proceed to disseminate our findings and suggestions over the next two years.

The world has modified in lots of – some very surprising – methods within the practically 20 years since Lord Turner’s Pensions Fee reported. We’re extremely excited as an organisation to start our venture of gathering, consolidating and offering essential proof on the following points going through pensioners within the UK, and giving our suggestions to policymakers on finest method these points. And we’re delighted to be working with the abrdn Monetary Equity Belief, and with Alistair Darling, David Gauke and Joanne Segars – and with a large set of stakeholders – to provide you with agency reform proposals that might construct on the profitable implementation of the Pensions Fee suggestions.


Determine A1. Imply worker and employer contributions to office pensions (as a proportion of earnings) amongst non-public sector workers, 2019

Word: Consists of non-public sector workers aged 22–59 taking part in a non-public pension. Worker contributions embody these made by means of wage sacrifice.

Supply: Authors’ calculations utilizing the Annual Survey of Hours and Earnings, 2019.


[1] UK cohort life expectations for 2023, taken from the most recent (2020-based) life tables:

[2] Underneath the triple lock, state pensions improve every monetary 12 months by the best of 2½%, client worth inflation and earnings development as much as September of the earlier 12 months.

[3] When automated enrolment was designed, the Pensions Fee (2005, p. 283) thought {that a} median earner would wish to save lots of roughly the identical quantity on prime of their proposed default minimal fee of 8% of band earnings to get to an affordable retirement earnings.


Division for Work and Pensions, NatCen Social Analysis. (2021). Household Assets Survey, 1994-2020. [data series]. 4th Launch. UK Information Service. SN: 200017, DOI: 10.5255/UKDA-Collection-200017

Workplace for Nationwide Statistics. (2019). Household Expenditure Survey, 1968-1993. [data series]. third Launch. UK Information Service. SN: 200016, DOI: 10.5255/UKDA-Collection-200016

Workplace for Nationwide Statistics. (2022). Annual Survey of Hours and Earnings, 1997-2020: Safe Entry. [data collection]. twenty first Version. UK Information Service. SN: 6689, DOI: 10.5255/UKDA-SN-6689-20

Workplace for Nationwide Statistics. (2023). Labour Power Survey, 1975-2022. [data series]. seventh Launch. UK Information Service. SN: 2000026, DOI: 10.5255/UKDA-Collection-2000026


The abrdn Monetary Equity Belief has supported this venture (grant reference 202206-GR000068) as a part of its mission to contribute in the direction of strategic change which improves monetary well-being within the UK. Its focus is on tackling monetary issues and bettering dwelling requirements for folks on low-to-middle incomes. It’s an impartial charitable basis registered in Scotland. Co-funding from the ESRC-funded Centre for the Microeconomic Evaluation of Public Coverage at IFS (grant quantity ES/T014334/1) can also be gratefully acknowledged. The authors wish to thank Alistair Darling, David Gauke, Mubin Haq and Joanne Segars for helpful recommendation and feedback, and David Sturrock for help with evaluation of life expectancy. This work incorporates statistical knowledge from the Workplace for Nationwide Statistics (ONS) that are Crown Copyright. The usage of the ONS statistical knowledge on this work doesn’t suggest the endorsement of the ONS in relation to the interpretation or evaluation of the statistical knowledge. This work makes use of analysis datasets which can not precisely reproduce Nationwide Statistics aggregates.