Business reporter
Getty imagesPeople who retired in 2050 will be worse than pensioners today, warning the government, unless action is taken to promote retirement savings.
The Department of Work and Pension (DWP) is reviving the Pension Commission, who reported about 20 years ago, to see how to deal with the issue.
DWP said that at almost half of the age of work, adults are not investing any money in a private pension, which is less likely to save low-earning and self-employed pension.
This decrease is also worse between women and some ethnic groups, with only one-to-four people in a private pension saving Pakistani or Bangladeshi background.
People who draw their pension after 25 years from now are scheduled to deteriorate £ 800 or 8% per year compared to their counterparts, the department said, 10 out of 10 people are not currently saving enough for their retirement.
Instead of starting a new commission from scratch, the government said it was reviving the “Landmark” Turner Pension Commission, which was reported under the final labor government in 2006, and led the roll-out of automated enrollment in pension savings. As a result 88% of eligible employees are now saving, above 55% in 2012, DWP said.
Despite that progress, DWP stated that the new analysis includes the “Stark” findings:
- More than three million self-employed workers are not savings in pension
- There are only one-less and less earning pension in the private sector.
- Only one-four people of Pakistani or Bangladeshi heritage are saving
The analysis found a 48% gender difference in private pension funds among retired people, with a specific woman receiving a person with only more than £ 100 per week and £ 200 from private pension income.
The Commission is not designed to directly address issues around the cost of state pension.
Recent reports have questioned the power of the “triple lock” launched in 2010, which guarantees that the state’s pension will grow every year with the same amount of average wages, inflation, or 2.5%, which is more.
As the age of the population is, and people live for a long time, the cost of that policy increases significantly.
Its cost is estimated to be three times higher by the end of the decade, which was the original estimated after the gradual years of high inflation, followed by strong wages.
Instead, will report in 2027, which will look into the savings in private sector pension.
This trades will bring unions, employers and independent experts together, some of which also participated in the original commission. It will see what people are stopping from putting more in their retirement vessel and the goal will be to create a national consensus around the future strategy.
Kate Smith, head of pension at the pension firm Egon, urged the Commission to create “bold, brave and possibly incredible recommendations”, including “significant growth” for auto-neolment contribution after 2029.
Paul Novak, general secretary of the Trade Union Congress, described it as “an important step ahead”.
He said, “Everyone is entitled to dignity and security in retirement, but now many workers – especially private sector people – will sufficiently find themselves to get themselves,” he said.
Age UK Charity Director Caroline Abraham said that while the state pension had provided a large part of income for most pensioners, it was “extremely important” to consider the role of private savings, as the current system was leaving many pensioners who were struggling to end.
“Hopefully it can be avoided in the future and especially deprived groups, including women with low-paying and self-employed people, they can be helped to invest when they are suitable for doing so,” she said.
Catherine Foot, director of the Think Tank Standard Life Center for the future of retirement, said 17 million people were not making enough savings to achieve retirement they wanted.
“In the next two decades, when the effects of the savings crisis will actually start biting,” he said.
It was important that the commission was able to withdraw one step and see the system in its entirety, “he said.
“There is an opportunity to investigate how different elements of the system are working together.”
