- The Pensions Commission calls for a new national settlement for pensions as interim report warns around 15 million people are not saving enough for retirement today – and that number could rise to 19 million by the 2050s
- Only 4% of wholly self-employed people are saving for retirement and the gender pension gap for people in their late 50s is 48% – AJ Bell research indicates the gap begins around age 28
- Around 3-in-10 private pensions are accessed from the minimum pension age, but the report doesn’t examine the context around why some people choose to do that
- Report warns on dangers of accessing pension early, an issue exacerbated by recent pre-Budget speculation in the absence of a clear commitment to a Pension Tax Lock
- The Pensions Commission is expected to publish its final report early in 2027, laying out recommendations for a new ‘national settlement’ for pensions
Rachel Vahey, head of public policy at AJ Bell, comments:
“The Pensions Commission interim report is a stark warning that millions of people are heading towards retirement without enough money to maintain their standard of living. Continuing as we are is simply not sustainable.
“The shift from generous defined benefit pensions to defined contribution schemes has transferred more responsibility and risk onto individuals, at the same time as people are living longer and struggling with the cost of everyday life.
“But we also need to avoid simplistic conclusions. The Commission reports concerns that people are taking high levels of full cash withdrawals. However, the fact that people access pensions early does not automatically mean they are making bad decisions. Some are bridging the gap to state pension age, moving gradually into part-time work or cashing in very small pension pots while leaving larger retirement savings untouched.
“Above all, people need confidence that if they save for the long term, the rules will not constantly change. In the run up to the last two Budgets, repeated speculation around pension tax breaks led to many more people making the rushed, and sometimes irreversible, decision to access their tax-free cash. The chancellor had the opportunity to stamp out this speculation but chose not to act. These rumours only undermine trust in the entire pension system. If we want people to lock money away for decades, they need confidence the goalposts will stay put.
“The report is right to highlight the crisis among the self-employed, where millions are not saving into pensions at all. This has been a known problem for years, but governments and industry still have not found a workable solution for people with irregular incomes and competing financial pressures.
“Another group highlighted by the Commission for undersaving is women, calculating that women’s pension pots are 48% smaller than men’s for those in their late 50s. This reflects AJ Bell’s findings in researching the gender pension gap, which identified that women’s pension contributions start to fall behind men at the age of 28. It found that financial pressures push pension savings down the priority list – so only 8% of women prioritise their retirement savings at this age, compared to 22% of men.
“The Pensions Commission has the potential to bring about landmark pension change. But the Commission cannot pick and choose which parts of the retirement income equation they want to focus on. There are many elements which make up someone’s income for later life. The final report should consider the increasing number of people renting in retirement. The state pension also has to remain central to this debate. For many people it will form the backbone of their retirement income, and workers need far clearer information about what they are likely to receive and when, rather than it being used as a political tool to garner more votes.”
