Five Steps to Better Pensions Final Report published

Pensions UK published its Five Steps to Better Pensions: Final Report on 16 October 2023, setting out five steps for pension reform¹. The organisation says that without policy intervention, most people in the UK will retire with inadequate pension income¹.

The report follows earlier work on the same subject. Pensions UK's research found that without reform more than 50% of savers will fail to meet the retirement income targets set by the 2005 Pensions Commission¹. The final report builds on an earlier report and consultation, Five Steps to Better Pensions: Time for a New Consensus, published on 12 October 2022¹.

Pensions UK states that if all its proposals are implemented, and the State Pension Triple Lock maintained, people on all income levels will have an improved income in retirement¹. The page does not list the five steps individually, and the specific measures in the final report have not been reported in the material available¹.

The organisation has previously called for changes to automatic enrolment. It notes that the Government has begun reforms so that people will save from the first pound of pension saving and from age 18 rather than age 22, which it describes as welcome but insufficient on its own¹. In a February 2022 response to the Work and Pensions Select Committee, Pensions UK called for the automatic enrolment 2017 Review recommendations to be implemented and for a move to 12% per annum contributions, noting the timetable would need to be put back to navigate the cost of living crisis¹. Its research has also examined the profiles of low earners who earn less than £10,000¹.

On the State Pension age, Pensions UK said in a May 2022 response to the Second State Pension age Review that 68 is already high enough compared to other OECD countries¹.

Why it matters for households

The report concerns the income people can expect in retirement. Pensions UK's assessment is that, on current policy, more than half of savers will not reach the retirement income targets set by the 2005 Pensions Commission¹. Automatic enrolment has increased the number of people saving into a workplace pension, and Pensions UK says it will deliver a real improvement in retirement outcomes for millions of people, but it states that opportunities to improve the system remain¹.

The measures discussed affect when saving starts and how much is paid in. Saving from the first pound of pension saving and from age 18 rather than age 22 would bring younger people and lower earners into automatic enrolment earlier¹. A move to 12% per annum contributions would raise the amount paid in by employees and employers, though Pensions UK has said the timetable for this would need to be put back¹. The report states that its proposals, alongside maintaining the State Pension Triple Lock, would improve retirement income for people on all income levels¹.

What happens next

Pensions UK says it will continue working with its members and the industry to build a consensus on a better pensions framework¹. A Better Pensions Charter was published on 18 October 2023, which Pensions UK describes as a commitment from the pensions industry, stakeholder groups and policymakers to support a framework for pensions policy¹. No implementation dates for the five steps have been reported¹.