Reaction as government delays phase two of pensions review

A major review into pensions adequacy has been delayed, according to reports in the national press.

It had been hoped the review would set a timetable for boosting automatic enrolment minimum contributions and retirement saving among the self-employed.

The second stage of the pensions review was due to start before the upcoming Christmas break.

It was expected to include the implementation of the 2017 review of auto-enrolment recommendations, such as reducing the minimum age from 22 to 18, and removing the threshold so pension contributions are made from the first pound earned.

Additionally, a timetable for phasing in higher mandated contributions from 8% to 12% of earnings over the next decade was anticipated.

AJ Bell director of public policy, Tom Selby, said delaying will put millions at greater risk of facing a crisis when they reach retirement.

He added: “Labour has placed ‘fixing the foundations’ of the UK economy front-and-centre of its political strategy and it appears the much-anticipated review into pensions adequacy has fallen victim to this push for growth.

“Any review of adequacy would have to consider automatic enrolment minimum contributions, which in turn would have raised the prospect of increasing those contributions and potentially the burden imposed on employers.

“In the wake of the huge tax hit firms have been forced to wear following the Budget, tackling retirement saving adequacy may be viewed as less of an immediate priority.

“However, the foundations of pensions are also shaky and delaying meaningful action to address these problems will leave millions of people at greater risk of an income shortfall when they reach retirement.

Selby added that “pushing difficult decisions back will simply store up problems for the future”.

He concluded: “Labour now needs to come clean on exactly how it plans to tackle pensions adequacy, which remains one of the most pressing issues facing society and is a potential ticking time bomb if left unaddressed.”

Hymans Robertson’s head of pensions policy innovation, Calum Cooper, said the news “ends weeks of hope that this would launch by the end of 2024”.

“A prolonged, open-ended delay will be damaging for industry confidence in the ability for real change to take place.

“More importantly, it defers better retirement prospects for millions of people.

“Retirement adequacy is an enormous issue for savers heading towards retirement, and in turn this will remain an ongoing concern for future governments and UK society as a whole.

“There should be nothing to fear from undertaking a meaningful pension review to tackle the adequacy challenge. Given the lack of timescale provided, this delay could add months and years to the formation and implementation of decisions.”

He said Hymans Robertson “would urge the government, if it must delay, to take it as an opportunity to design an independent pensions commission”.

The Lang Cat’s director of public affairs, Tom McPhail, said: “News of the government’s decision to delay phase two of the pension review is not a great surprise, given their recent Budget announcements on the minimum wage and National Insurance. Nevertheless, it will be met with widespread disappointment across the financial services industry and associated public policy stakeholders.

“The achievements of the Turner Commission 20 years ago, laying the foundations for auto-enrolment, are being eroded by the ongoing failure of successive governments to develop the workplace pension system that was created in the early 2010s.

“If the government isn’t willing to tackle head-on the tough political choices, it should appoint an independent commission to take on the hard work instead.”

The Association of British Insurers (ABI) director of long-term savings policy, Dr Yvonne Braun, said: “The government’s landmark pension review is critical, not just to address scale and how pensions are invested [but also to] address the UK’s pension savings crisis, the state pension age and consumer decision making.

“We understand that the government can’t put additional pressure on businesses at this time. But a roadmap for the longer term is still sorely needed to prevent pensioner poverty in the future, and to chart a clear path that gives businesses and individuals the certainty to plan.”

Aegon head of pensions, Kate Smith, described the delays as “not only deeply disappointing, but also concerning for many who will be left out in the cold”.

“Most of Britain is currently under saving, and time is running out for many to benefit from higher mandated auto-enrolment contributions, which would help people to build up an adequate income in retirement.

“We fully understand that the government needs to consider trade-offs, but delaying the second phase of the pension review risks damaging many people’s financial futures.”