The Pensions and Lifetime Savings Association (PLSA) has published five proposals for reforming the UK pension system and opened a consultation on them1. The document, "Five steps to better pensions: time for a new consensus", was published on 1 October 2022, with a research report supplement dated 11 October 20221.
The PLSA says its research found that "without reform more than 50% of savers will fail to meet the retirement income targets set by the 2005 Pensions Commission"1. The five steps are: national objectives for the pension system, described as "adequate, affordable and fair", with regular monitoring; reform of the state pension so that everyone achieves the Minimum Retirement Living Standard, to prevent pensioner poverty; reform of automatic enrolment to bring in more people and at higher contributions; additional policy interventions for under pensioned groups; and industry initiatives to help people engage with pensions1.
On automatic enrolment, the PLSA proposes removing band earnings and "gradually increasing contributions from 8% to 12%, split evenly between employers and employees"1. It says this is so that people on median earnings are more likely to achieve the Pensions Commission's Target Replacement Rates1. The PLSA adds that it had already been calling on the Government to increase contributions and improve saving among those not included in automatic enrolment, and that it has "also supported proposals to reduce the qualifying age for automatic enrolment" and to "ensure that savings should begin from the first pound of earnings"1.
The five steps are set out as follows1:
| Step | Proposal |
|---|---|
| National objectives | Clear national objectives for the UK pension system, "adequate, affordable and fair", with regular formal monitoring |
| State pension | Reform so that everyone achieves the Minimum Retirement Living Standard, to prevent pensioner poverty |
| AE reform | Get more people saving, such as younger people, multiple job holders and gig economy workers, and at higher contributions by removing band earnings and raising contributions from 8% to 12% |
| Under pensioned groups | Additional policy interventions, including for women, gig economy workers and self-employed people |
| Industry initiatives | Actions to help people engage with pensions, receive higher contributions, or get better pension outcomes |
The PLSA says it is "seeking views from interested parties and stakeholders on our research and policy proposals"1.
"We are seeking views from interested parties and stakeholders on our research and policy proposals. The consultation will run until 31st March 2023"
A later PLSA report, published in October 2023, states that "In October 2022, we proposed five recommendations for reform" and restates them in light of consultation responses and policy developments2. That report says the Government had introduced some reforms to the automatic enrolment regime so that people save from the first pound of pension saving and from age 18 rather than age 22, and that "These reforms received Royal Assent in September 2023"2. It also sets out a revised contribution split: "Over the next decade contributions should rise gradually from 8% to 12%", with employees required to put in 1% extra and employers 3% extra, so that by the early 2030s each pays 6%2. The 2023 report projects that a median earner working a full working life without career breaks would see retirement income rise from £17,672 to £20,609 for men and from £17,177 to £19,825 for women if all the proposals are implemented and the State Pension Triple Lock is maintained2.
Why it matters for households
The proposals concern the workplace pension contributions paid by employees and employers, the age and earnings at which automatic enrolment begins, and the value of the state pension. Under the 2022 proposal, total contributions would rise from 8% to 12% of qualifying earnings, split evenly between employer and employee, phased in gradually1. The 2023 report sets out a different split during the transition, with employees contributing 1% extra and employers 3% extra, reaching 6% each by the early 2030s2. The PLSA also proposes removing band earnings, so that saving starts from the first pound earned, and reducing the qualifying age for automatic enrolment1. The 2023 report says reforms to save from the first pound and from age 18 received Royal Assent in September 20232.
The state pension element would affect everyone entitled to it, since the proposal is that it should be reformed so that everyone achieves the Minimum Retirement Living Standard1. The PLSA's 2023 report also says the state pension's value should be maintained by keeping the Triple Lock2. Under pensioned groups named in the proposals include women, self-employed people and gig economy workers1.
What happens next
The PLSA published a final report in October 2023 restating the five steps in light of consultation responses and policy developments, and says it will work with stakeholders to make the case for change2. No further consultation or implementation timetable is set out in the documents.
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