Is the UK saving enough for retirement?

• The new Pensions Commission announced by the Government has a crucial role to play in improving retirement for millions of people in the UK.
• Automatic enrolment, introduced in the UK in 2012, has been one of the most significant policy successes in boosting the numbers of people saving for retirement.
• Millions more workers are now saving for retirement as a result¹, and the UK’s experience has become a reference point for policymakers around the world seeking to improve long-term savings.
• However, while participation has risen, there remains a pressing concern about adequacy - whether people are saving enough to achieve a decent standard of living in retirement.
• Against this backdrop, we welcome the government’s decision to establish a new Pensions Commission.

Facing the Adequacy Gap

Official statistics highlight the scale of the challenge:

• 15 million people are currently under-saving for retirement, putting future living standards at risk²
• By 2050, retirees could be 8% worse off on average compared to those retiring in 2023³
• Nearly 45% of working age adults currently save nothing for retirement⁴

State Street’s Global Retirement Reality Report⁵  provides further insight into savers’ sentiment:

• UK savers were found to be the least optimistic globally about their retirement prospects – with over half of UK respondents reporting a lack of optimism in their retirement prospects.
• Despite this lack of confidence, the vast majority of savers surveyed had not taken any action to improve their outlook.
• The average expected retirement age for those surveyed was 65, yet 70% of members surveyed have not adjusted expectations about when they might realistically be able to retire.

Launch of the Pensions Commission

In response to these challenges, the government has established a new Pensions Commission to examine the long-term future of the UK retirement system. The Commission’s remit is to consider how to make pensions stronger, fairer and more sustainable, while building consensus among employers, workers and policy makers⁶. Running in parallel, the government has also launched a formal review of the State Pension age, which is currently 66 and due to rise to 67 between 2026 and 2028.

One important limitation of the new Pensions Commission is that taxation and the State Pension are outside of its remit, meaning that questions around tax relief and triple lock will not be addressed. This is unfortunate given how interconnected these issues are. However, the Commission still has valuable opportunity to shape the future of private retirement saving and there are several areas where its work could deliver real progress:

1. Broadening automatic enrolment - reviewing the current enrolment criteria to explore how lower earners, younger workers, and the self-employed can be better included in the system.
2. Reviewing contribution levels - considering what rates are both realistic and effective in helping savers achieve adequate standard of living in retirement, while balancing affordability for both individuals and employers. Many in the industry point to 12% of earnings as a more reasonable baseline contribution rate ⁷. A phased approach, similar to the rollout of auto-enrolment, could help manage the transition for both employers and employees.
3. Strengthening defaults - ensuring that investment strategies and retirement pathways are designed to support good outcomes for many members who do not make active choices. This is an area which spans across multiple policy initiatives such as the Pensions Schemes Bill, Pensions Investment Review and Value for Money.
4. Improving clarity on incentives - 25% of UK savers in State Street’s Global Retirement Reality Report cite pensions taxation as a top factor undermining retirement confidence. While the Commission cannot address tax directly, clearer information on incentives could help encourage higher savings. 

Together, these priorities represent a chance for the Commission to build on the success of automatic enrolment and help create a stronger, fairer pensions system for the future.