The Institute for Fiscal Studies has called for a "major review of pension provision" after its recent report raised concerns that the majority of workers are saving insufficiently into pensions arrangements and this will adversely impact their living standards in retirement. Among other points, the report found that:
- Although automatic enrolment is deemed a success in boosting workplace pension participation, many savers are contributing low amounts to a pension. For middle earners, 60 per cent of private sector employees are saving less than 8 per cent of their earnings, and 87 per cent are saving less than 15 per cent, which is the level the Pensions Commission has suggested should be the target. Low contribution rates are more prevalent amongst low earners, largely because their qualifying earnings are a smaller share of their total earnings.
- DB pension provision continues to decline and those retiring with DC pension pots will face considerable difficulty and risk in managing their finances through retirement. The abolition of state earnings-related pensions, low interest rates, low average contributions to DC arrangements and the introduction of pension flexibilities are all contributory factors.
In light of its findings, the IFS will conduct a joint comprehensive review with Abrdn Financial Fairness Trust of the UK pension system and policy, with a steering group including Alistair Darling (former Chancellor of the Exchequer), David Gauke (former Secretary of State for Work and Pensions) and Joanne Segars (former Chief Executive of the Pensions and Lifetime Savings Association).
The IFS expects to publish its final recommendations and options for reforms in summer 2025.
