Molly Broome

Pensions Commission: Terms of Reference

Addressing this issue is a key priority for the Government, as reflected in the revival of the Pensions Commission. The Commission will explore ways to improve retirement outcomes for those already in the AE system and for those currently missing out. www.gov.uk/government/p...

AE has been a major policy success, significantly increasing pension participation. However, the statistics released today reveal that some groups still have lower participation rates, which could leave them more vulnerable to poverty in retirement.

The proportion of people who start saving but then opt out within the opt-out period has been trending upward over time. This may reflect increased cost of living pressures in recent years or could be linked to the freezing of the earnings trigger and lower earnings limit.

Pension participation also varies by ethnicity. Only 68% of eligible Pakistani and Bangladeshi employees were saving into a pension in 2022-23 to 2023-24, compared to 87% of eligible White employees.

Just 17% of the self-employed were participating in pension saving in 2023-24, down from 21% in 2009-10.

Eligible part-time employees are also less likely to be saving into a workplace pension, compared to full-time employees. That gap has widened over time.

Workplace pension participation also increases with earnings: 79% of eligible employees earning £10k-£20k were saving into a workplace pension, compared to 94% of those earning £70k or more.

But employees working for small employers were less likely to participate in workplace pension saving: only 59% of eligible employees at companies with fewer than 5 employees were saving into a workplace pension.

Around eight-in-ten (82%) employees in Great Britain were saving into a workplace pension in 2024 – this amounts to 23.3 million people in total.

New workplace pension participation statistics were published this morning, revealing that certain groups remain at greater risk of heading into retirement with insufficient savings. Here’s what you need to know 🧵

Two decades after the Pensions Commission, the focus is no longer on pension participation. Today’s challenge is adequacy, flexibility, and sustainability - and the upcoming review is likely to reflect that shift.

Sharing the benefits - The Inquiry Can Britain secure broadly shared prosperity?

We have previously suggested linking both working-age and pensioner benefits to earnings growth. This would preserve purchasing power while ensuring intergenerational fairness and fiscal realism. economy2030.resolutionfoundation.org/reports/shar...

The triple lock should also be on the table. It has played a major role in boosting pensioner incomes, but it’s not without trade-offs. Given today’s fiscal pressures, it’s time to explore more balanced uprating mechanisms – ones that protect incomes while supporting long-term sustainability.

Life expectancy varies significantly across regions, so delaying retirement may be justifiable for some, but it risks penalising those in poorer areas who already face shorter retirements. www.resolutionfoundation.org/comment/why-...

The State Pension is also expected to be in scope. Demographic change and rising longevity are increasing its fiscal cost. And while raising the State Pension age can provide some relief to the public purse, it remains a blunt tool.

Precautionary tales • Resolution Foundation Families in Britain are confronted with what can be termed a ‘triple savings challenge’. This encompasses a lack of accessible ‘rainy day’ savings to cushion small cashflow shocks, inadequate precauti...

The review should also consider flexibility – particularly whether models like ‘sidecar’ savings accounts can help people balance long-term savings with short-term financial resilience. www.resolutionfoundation.org/publications...

This highlights a fundamental question for the review: should policy aim to deliver full adequacy for all, or act as a foundation that leaves space for individual choices and top-ups? The Pensions Commission was clear that it should be the latter.

In response to adequacy concerns, there have been calls to increase default contributions above 8%. But policymakers must proceed with care. While higher rates might help middle and higher earners reach their TRRs, they risk leading to over-saving among lower earners.

But while participation is up, adequacy remains a concern. Recent @theifs.bsky.social research shows that 39% of private sector employees are not on track to meet their target replacement rate (TRR) – the level needed to maintain living standards in retirement.

Currently, employees are enrolled into a workplace pension if they are aged 22 to State Pension age and earn at least £10,000 a year. The minimum total contribution is set at 8% of qualifying earnings (between £6,240 and £50,270), with 3% from the employer and 5% from the employee.

It’s been 20 years since the Pensions Commission laid the foundations for auto-enrolment. Since then, a lot has changed: in 2009, 50% of employees saved into a workplace pension; by 2023, this had risen to 80%.

Tonight, Rachel Reeves delivers her Mansion House speech, and we expect she’ll announce the long-awaited review into pension adequacy (alongside other reforms such as financial deregulation).

Saving penalties • Resolution Foundation Means-tested benefits in Britain are built on the principle that individuals with significant financial resources should use those before turning to the state for help. That’s why wealth – as well as ...

Read our full analysis here: www.resolutionfoundation.org/publications.... Thanks to my co-authors @alexclegg.bsky.social and @epybus.bsky.social, and @financialfairness.bsky.social for supporting the research.

Finally, removing the cliff edge at £16,000 (costing £900 million in 2029-30) should be considered as part of the upcoming review of UC. While not an immediate priority, this reform would remove cliff edges, poverty traps, and perverse incentives.

Second, uprating the current capital limits with prices from 2026-27 onwards (costing £135 million in 2029-30) would prevent the system from becoming increasingly punitive over time.

First, money saved through Help to Save and LISAs should be exempted from the capital rules. This would empower low-to-middle income families to build more meaningful financial resilience and to achieve long-term financial goals, such as buying a home.

So, what can be done to address these shortcomings?

And third, the capital rules potentially discourage individuals from saving, reducing their financial resilience. In the two years leading up to March 2023, 12% of UC recipients that could afford to save said they avoided doing so due to the risk of losing benefits.

Had the thresholds risen with inflation, they would now be over £10,000 and £27,000, respectively.

Second, the capital thresholds have been frozen since 2006, meaning many more recipients now face reduced or lost entitlements. In 2006-08, 35% of working-age families in Britain had savings above £6,000, by 2020-22, this had risen to risen to 45%.