Nick French | Commercial Director | Wealthtime

This article is intended for regulated financial advisers and investment professionals only. Wealthtime does not provide financial advice. This information is not intended as financial advice and should not be interpreted as such.

Nearly twenty years after the first one, the government has launched a new Pensions Commission to address persistent challenges in the retirement system and the growing concern that tomorrow’s pensioners will be worse off than today’s.

What are the issues?

Alongside the announcement of the Pensions Commission, the government also published an analysis of the current pensions landscape. It shows that significant progress has been made since 1997. Pensioner poverty has fallen from 30% to 15%, and auto-enrolment has resulted in more than 22 million workers now saving into a pension. However, challenges remain. Nearly 15 million working-age people are not on track for a decent retirement, with women, low earners, the self-employed and some ethnic minority groups particularly at risk of pension shortfalls.

The government estimates that those retiring in 2050 will have 8% lower private pension income than those retiring today. And the problem is set to worsen, with the UK’s ageing population meaning that pensioner numbers are expected to rise by over 50% by the 2070s. This demographic shift will put further pressure on public finances, with State Pension costs projected to increase from 5.2% to 7.9% of GDP by 2073-74.

What happens next?

The new Pensions Commission will:

• Conduct a comprehensive review of the UK’s entire pension system and the outcomes it delivers for retirees.
• Focus on the adequacy of pension saving, tackling persistent inequalities and balancing risk to ensure income sustainability throughout retirement.
• Align with broader reforms, including the Pension Schemes Bill, the Pensions Investment Review and the statutory review of State Pension age, to deliver long-term recommendations for a modern, robust pension system.

What could change?

The policy paper highlights that the risks involved with pension investing have largely shifted from the employer to the employee alongside the move from defined benefit to defined contribution schemes. The need for regulated advice to support long-term financial resilience and complex retirement decisions is clear, but the report finds that just 16% of 40 to 75-year-olds used an independent financial adviser or Pension Wise in the past 12 months.

Potential reforms could include increasing the auto-enrolment contribution rate, lowering the age threshold to include younger workers, and extending coverage to include those on lower incomes and the self-employed. While these changes aim to boost long-term retirement security, they also present a real challenge in ensuring affordability for groups who must prioritise immediate living costs over future savings.

Implications for advisers

Bridging the significant gaps in the current pension system and supporting the 45% of the working-age population not saving into a pension each month will be key to improving outcomes. This is particularly true for the disproportionately affected groups, including women, carers, renters, those on low income, the self-employed and some ethnic minorities.

These groups are currently underrepresented in the traditional advised client base but would benefit greatly from support in balancing short-term financial pressures with long-term goals and education around the value of contributing to a pension as early as possible.

Reforming the pensions landscape will not be easy, but the launch of the new Pensions Commission presents an opportunity for our sector to play a central role in expanding access to advice, improving outcomes and helping clients, especially those most at risk, build a more secure financial future.