The recent Second Reading of the Pension Schemes Bill (the Bill) in Parliament brought pensions adequacy to the forefront of the national debate, highlighting widespread concern over whether current arrangements will deliver sufficient retirement income for all savers. While the Bill’s focus has largely been on investment reforms and regulatory changes, many stakeholders – including MPs across the political spectrum – have called for a more robust government strategy to address the adequacy gap, particularly for groups currently underserved by the system. Read our article on the Bill’s Second Reading for further insight into the debate on pensions adequacy.
The Pensions Commission: Phase 2 launch
In response to these concerns, the government has announced the launch of a new Pensions Commission to deliver Phase 2 of the ongoing pensions review. This Commission’s primary remit is to examine the adequacy of pension benefits across the UK workforce and to make recommendations for reform. The move signals a recognition at the highest level that, despite recent legislative progress, fundamental questions remain about whether pension contributions and coverage are sufficient to ensure a secure retirement for all.
Why adequacy matters
Adequacy of pension benefits is not just a technical issue – it goes to the heart of financial security in later life. The debate during the Second Reading underscored that, while investment reforms may improve returns, they do not address the core challenge faced by many: are people saving enough, and are enough people saving? Suggestions raised in Parliament included reviewing minimum contribution rates, expanding automatic enrolment to the self-employed and lowering the minimum age for pension saving.
What will the commission do?
The new Pensions Commission is expected to:
- assess current and projected retirement outcomes for different groups, including younger workers, the self-employed and those with interrupted work patterns;
- consider whether the current minimum contribution rates under automatic enrolment are adequate;
- explore policy options to close the adequacy gap, such as increasing minimum contributions, broadening coverage and supporting more flexible saving options; and
- engage with stakeholders across the industry, including employers, trustees and member representatives, to ensure a balanced and evidence-based approach.
This initiative is widely seen as a crucial next step in the evolution of the UK’s pension system, building on the foundations laid by the Bill and responding to the clear appetite for further action.
Next steps and industry response
The announcement of the Commission has been broadly welcomed by industry commentators, who see it as an opportunity to address longstanding issues that have persisted despite previous reforms. There is, however, recognition that the task ahead is complex, requiring a careful balance between improving adequacy and maintaining affordability for both employers and employees.
As the Commission begins its work, all eyes will be on its recommendations and the potential for policy shifts in the coming years. Employers, trustees and pension savers alike should stay engaged with the process and be prepared for further changes as the UK seeks to ensure that pension provision is both adequate and sustainable for the future.
