People retiring in 2050 are on track to be poorer than pensioners today, the government has warned, as it launches a review to tackle the retirement savings crisis.
It says that 45% of working-age adults do not save into a pension, with lower earners, the self-employed and some ethnic minorities particularly at risk. There is also a stark gender pension gap, with women having much smaller pension incomes in later life.
The Department for Work and Pensions and Treasury are now reviving the Pensions Commission, which investigated how to boost retirement savings almost 20 years ago.
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Back in 2006, the commission led to the roll-out of auto-enrolment into pension saving. The majority (88%) of eligible employees are now contributing to a workplace pension, up from 55% in 2012.
Torsten Bell, minister for pensions, comments: “The original Pensions Commission helped get pension saving up and pensioner poverty down. But if we carry on as we are, tomorrow’s retirees risk being poorer than today’s.
“So, we are reviving the Pensions Commission to finish the job and give today’s workers secure retirements to look forward to.”
Why are tomorrow’s pensioners set to be worse off than today’s?
The government has published some worrying figures that highlight the scale of the challenge to boost people’s retirement savings.
It says that retirees in 2050 are on course for £800 or 8% less private pension income per year than those retiring today. Four in 10 – or nearly 15 million people – are undersaving for retirement.
Its analysis also found that:
- More than three million self-employed people are not saving into a pension
- Only one in four low earners in the private sector are saving into a pension
- Just one in four of those from a Pakistani or Bangladeshi background are saving
- A typical woman approaching retirement can expect a private pension income worth over £5,000 less than that of a typical man (just over £100 a week for a woman compared to just over £200 a week for a man)
While the introduction of auto-enrolment increased the number of workers contributing to a pension, saving levels have remained low. About half of employees in the private sector only save the minimum contribution level (8% of earnings).
The reason why many future retirees will be poorer than today’s pensioners is basically due to them not putting enough money away for their golden years. The relaunched commission will explore the complex barriers behind this.
Chancellor Rachel Reeves says that following Labour’s Pension Schemes Bill and the creation of pension megafunds, it was now time to go further and “ensure that people can look forward to a comfortable retirement”.
What will the Pensions Commission look at?
The Pensions Commission will examine the whole pension system and look at how to deliver a future framework that is “strong, fair and sustainable”.
It will not look at the state pension triple lock, state pension age or pension tax relief. However, the government has also launched a State Pension Age Review today (21 July 2025), as required by law, so any potential changes will be considered in that review.
The commission will be made up of Baroness Jeannie Drake (a member of the original commission), Sir Ian Cheshire and Professor Nick Pearce, who will be responsible for steering its work.
Baroness Jeannie Drake has been a Labour life peer since 2010, and has extensive pensions industry experience. For example, prior to being appointed to the House of Lords, she was deputy chair of the National Employment Savings Trust (Nest). She has also served on the board of the Pension Protection Fund (PPF).
Sir Ian Cheshire retired as group chief executive of Kingfisher in 2014, and has held several government roles since then, such as Lead Non-Executive. Nick Pearce is professor of public policy at the University of Bath. He was previously director of Institute for Public Policy Research (IPPR), and head of the No10 Downing Street Policy Unit.
Steve Webb, a partner at the consultancy LCP and a former pensions minister, notes: “The government has chosen its commissioners well. These are excellent, respected and knowledgeable people who will no doubt do a first-rate job.”
A final report will be published in 2027.
Potential changes that the commission could recommend include tweaking the auto-enrolment rules, and creating some kind of pension scheme for the self-employed. It may also look at making pension pots more flexible, such as allowing savers to dip into them before retirement.
The Institute for Fiscal Studies has previously suggested that higher earners should contribute more to their pensions, and that the scope of auto-enrolment should be widened to help avert a retirement crisis.
The think tank recommends expanding the auto-enrolment age range from 22 to state pension age to 16 to 74.
What do experts think about the Pensions Commission?
The Pensions Commission has been widely welcomed, with some experts arguing that bold action may be required to encourage people to save more.
Caroline Abrahams, charity director of Age UK, said: “The current system of saving has some significant gaps, which have left many pensioners struggling to make ends meet.
“Hopefully, this can be avoided in future, and particularly disadvantaged groups, including low-paid women and self-employed people on low incomes, can be helped to put money aside when appropriate for them to do so.”
Kate Smith, head of pensions at Aegon, is urging the new Pension Commission to make “bold, brave and possibly unpalatable recommendations to the government, such as implementing significant increases to auto-enrolment contributions during the next parliament for those on mid and higher incomes.”
Meanwhile, Paul Leandro, partner at the consultancy Barnett Waddingham, calls the UK’s retirement savings crisis a “ticking timebomb”, which could be pushed close to “detonation” as we won’t see a final report until 2027.
He thinks the long-term solution could be moving from an 8% auto-enrolment rate to at least 12%. “In all likelihood, the responsibility for that will need to be split between employee and employer.”
Leandro adds: “Good news comes in the explicit statement of intent to tackle the gender pensions gap, as well as low savings rates in the Pakistani and Bangladeshi communities.
“Two other groups who should not be overlooked are renters – as a quarter of 55+ workers are still renting, which massively impacts their chances of a comfortable retirement – and the disabled community, who are under-employed and grappling with higher short- and long-term costs.”
