Work and Pensions Secretary announces revival of landmark Pensions Commission as analysis reveals tomorrow’s pensioners face poorer retirements
The government has launched its review of the state pension age earlier than required, as Work and Pensions Secretary Liz Kendall warned that future retirees are on track to be poorer than today’s pensioners without urgent reform.
Speaking in west London on Monday, Kendall announced the revival of the landmark Pensions Commission alongside the mandatory state pension age review, marking a significant intervention in retirement policy just months after Labour took office. The state pension age is currently 66, with rises to 67 scheduled between 2026 and 2028.
The government is required to conduct a review into the state pension age every six years, but it appears to be starting this one earlier as the last one concluded in 2023.
Stark Warning on Future Poverty
New government analysis has revealed alarming projections for future pensioners, with retirees in 2050 on course for £800 or 8% less private pension income than those retiring today. The data shows that 4-in-10 or nearly 15 million people are undersaving for retirement.
“People deserve to know that they will have a decent income in retirement – with all the security, dignity and freedom that brings. But the truth is, that is not the reality facing many people, especially if you’re low paid, or self-employed,” Kendall said.
The crisis is particularly acute for certain groups, with over 3 million self-employed not saving into a pension and only 1-in-4 low earners in the private sector saving into a pension.
Pensions Commission Returns
The government’s response involves reviving the Pensions Commission, which successfully introduced automatic enrolment in 2006. The Commission of 2006 was a huge success, building a consensus for the roll-out of Automatic Enrolment into pension saving that means 88% of eligible employees are now saving, up from 55% in 2012.
The relaunched Commission will explore the complex barriers stopping people from saving enough for retirement, with its final report due in 2027. It will be led by Baroness Jeannie Drake, who served on the original commission, alongside Sir Ian Cheshire and Professor Nick Pearce.
Minister for Pensions Torsten Bell emphasised the urgency: “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.”
Gender Gap Crisis
The analysis also revealed a substantial gender disparity in retirement savings. New analysis today also reveals a stark a 48% gender pensions gap in private pension wealth between women and men. A typical woman currently approaching retirement can expect a private pension income worth over £5,000 less than that of a typical man (just over £100 per week for a woman compared to just over £200 a week for a man).
The problem extends to ethnic minorities, with just 1-in-4 of those from a Pakistani or Bangladeshi background saving for retirement.
State Pension Age Review Process
Alongside the Commission, the Government has, as required by law, also launched the State Pension Age Review, commissioning two independent reports for Government to consider when deciding the State Pension age for future decades.
Dr Suzy Morrissey will report on factors government should consider relating to State Pension age, while the Government Actuary’s Department will prepare a report on the proportion of adult life in retirement.
The Government remains committed to the principle of providing 10 years notice of changes to State Pension age, enabling people to plan effectively for retirement, meaning any changes would not take effect until at least 2035.
Industry Welcomes Move
The announcement received broad support from business and union leaders. Paul Nowak, General Secretary of the Trades Union Congress, said: “Everyone deserves dignity and security in retirement, but right now many workers – especially those in the private sector – will find themselves without enough to get by on. Far too many people won’t have enough pension for a decent retirement, and too many – especially women, BME and disabled workers and the self employed – are shut out of the workplace pension system all together.
Rain Newton-Smith, Chief Executive of the Confederation of British Industry, noted: “The only route to higher living standards both in work and in retirement is through higher growth, productivity and better savings. As we look to the next decade and beyond, finding a consensus across business, government and our society on how to support people to save by building on the Mansion House reforms can create a pathway to a better future.”
Urgent Action Needed
Caroline Abrahams, Charity Director of Age UK, emphasised the importance of swift action: “We warmly welcome the Pensions Review, which has the potential to lay the foundations for a system of retirement saving that’s fit for the future. If we’re to avoid future generations of pensioners experiencing financial hardship, we need reforms that enable more people to build a decent standard of living, and we need them sooner rather than later to maximise the numbers who can be helped.
She added that “the State Pension provides the bulk of retirement income for most pensioners, with 1.1million (13%) receiving all their income from the State”, highlighting the critical importance of getting both state and private pension policy right.
Building on Mansion House Reforms
Chancellor Rachel Reeves linked the announcement to broader pension reforms: “We’re making pensions work for Britain. The Pension Schemes Bill and the creation of pension megafunds mean an average earner could get a £29,000 boost to their pension pots. Now we are going further to ensure that people can look forward to a comfortable retirement.”
The review comes as around 1-in-2 workers in the private sector only save around the minimum contribution level (8% or less of earnings), suggesting that while automatic enrolment has increased participation, contribution levels remain inadequate for many.
What Happens Next
The Commission will make proposals for change beyond the current parliament to deliver a pensions framework that is strong, fair and sustainable. With the final report due in 2027, any significant changes to pension policy would likely not be implemented until the 2030s.
The early launch of the state pension age review suggests the government is preparing for potentially difficult decisions about retirement ages, though any changes would need to balance fiscal sustainability with fairness across generations.
As Jon Richards, General Secretary of UNISON, warned: “Every worker needs a pension they can rely upon in their old age. No one should be plunged into poverty when they retire. Any initiative that enhances current provision would be a good thing, especially moves to improve equality between men and women. With more pensioners falling into poverty as time goes by, it’s vital the commission works quickly.”
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