Labour Announces Major Review into Pension Saving Amid Poverty Concerns

Strategic Insights -

A major review into pension saving has been announced by Labour, amid concerns that today's workers face a higher risk of poverty in retirement. The review aims to encourage workers to save more money for their retirement, as experts warn that people looking to retire in 2050 are on course to receive £800 per year less than current pensioners. The Pensions Commission, which last met in 2006, will be revived to look at ways to improve pension saving, with analysis from the Department for Work and Pensions revealing that 15 million people are undersaving for retirement.

Key Takeaways:

  • 15 million people are undersaving for retirement, according to analysis from the Department for Work and Pensions.
  • 45% of working-age adults are not saving into a pension at all, with around three million self-employed people saving nothing for their retirement.
  • Only a quarter of people on low pay in the private sector and the same proportion from Pakistani or Bangladeshi backgrounds are saving into a pension.
  • The number of eligible employees saving into a pension has risen from 55% in 2012 to 88% following the introduction of automatic enrollment.
  • The Pensions Commission previously recommended automatically enrolling people in workplace pensions, which has led to an increase in pension savings.
  • The review will also look into the state pension, which is set to rise to 67 between 2026 and 2028, and a further increase to 68 is due to happen between 2044 and 2046.
  • The State Pension Age review will report back by March 2029, and the state pension rises every year in line with the triple lock, which ensures the state pension rises by the highest of inflation, wage increases, or 2.5%.

Statistics:

  • 15 million people are undersaving for retirement (Source: Dept for Work and Pensions).
  • 45% of working-age adults are not saving into a pension at all (Source: Dept for Work and Pensions).
  • £800 per year less than current pensioners is the projected reduction in pension savings for those retiring in 2050 (Source: Experts).
  • 25% of people on low pay in the private sector and from Pakistani or Bangladeshi backgrounds are saving into a pension (Source: Dept for Work and Pensions).
  • 88% of eligible employees are now saving into a pension after the introduction of automatic enrollment (Source: Dept for Work and Pensions).
  • £29,000 is the potential boost to pension pots for an average earner due to the Pension Schemes Bill and creation of pension megafunds (Source: Chancellor Rachel Reeves).
  • £15.5 billion is the estimated annual cost of the triple lock policy by 2030 (Source: Office for Budget Responsibility).

Sources:

  • Labour
  • Department for Work and Pensions
  • Chancellor Rachel Reeves
  • Work and Pensions Secretary Liz Kendall
  • Torsten Bell, Pensions minister
  • Office for Budget Responsibility (OBR)
  • Kate Smith, head of pensions at Aegon
  • Caroline Abrahams, charity director at Age UK