Pensions Commission interim report

Commenting on the second Pensions Commission’s interim report, Calum Cooper, Head of Pension Policy Innovation, Hymans Robertson, said:

“The world has changed since the first Pensions Commission. The foundations - automatic enrolment and a stronger State Pension - remain strong and have undoubtedly given millions better financial security in later life. But, now defined contribution (DC) pensions dominate workplace saving, and individuals are increasingly expected to manage complex financial decisions and risks on their own. In addition, housing costs are placing greater pressure on future retirees. These are all factors that need to be considered at the heart of this Pensions Commission’s recommendations.

“The challenge for the Commission is not to replace what works, but to build on it. Its success should ultimately be judged by outcomes, not participation alone. Higher contributions will be necessary, but they will not be sufficient. Better outcomes will also depend on wider coverage, effective risk-sharing, good investment value, sustainable retirement income and stronger financial resilience.

“The Commission should recommend that government implements the outstanding 2017 automatic enrolment reforms and sets a clear, phased direction towards total minimum contributions of at least 12%. These changes should be introduced gradually, with careful consideration of affordability and the balance between employer and employee contributions. Financial resilience measures, including sidecar savings, could help people remain enrolled as contributions rise.

“The Commission’s recommendations should also recognise the impact of housing as a core driver of adequate retirement outcomes. Pension policy cannot solve housing supply, but it can support wider wealth creation and help more people avoid entering retirement with continuing rental costs. The Commission should support stronger retirement income pathways and collective solutions that can make existing savings work harder, manage risks more effectively and help people secure a sustainable income throughout retirement.

“The recommendations must reflect the different challenges people face. Carers, self-employed workers, lower earners, multiple-job holders and those likely to rent in retirement should not be left behind by policies focused only on average outcomes. The Commission now has an opportunity to recommend an ambitious but practical package of reform. That package should help more people achieve adequate, fair and sustainable outcomes throughout retirement, while retaining the confidence of savers, employers and the pensions industry.”

If you would like to see our full response to the interim report, please get in touch. 

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