Pensions minister Torsten Bell has issued a "blunt truth" warning to millions of UK taxpayers, as a new report exposed failings in the current pension system. The Department for Work and Pensions (DWP) minister highlighted that vast numbers of people are "falling outside" the system, particularly among the self-employed, a group that surpasses 4 million people according to IPSE, the self-employment association.
Warning on retirement incomes
In his latest newsletter, Mr Bell said: "The blunt truth is that collectively we are not saving enough to ensure that today's workers, tomorrow's pensioners, have a comfortable retirement." He added: "Currently we're on track for those retiring in 2050 to have private pension incomes that are 8% lower than people retiring today. In an ageing society - the number of people aged over 75 is set to double between now and 2075 - that is simply not what progress is supposed to look like."
The Labour minister, who has held senior roles working for Ed Miliband and Alistair Darling, also emphasised that people currently in their 40s retiring in 2050 would face a grimmer retirement than people today unless there was a major shift.
Reforms and commission findings
His comments come as the Pensions Commission considers proposing reforms to the UK's pension system. Mr Bell promised in his latest statement that Andy Burnham's government would not disregard the commission's recommendations, saying: "We'll act on their findings."
Last Wednesday, the Society of Pension Professionals (SPP) warned that millions of self-employed workers are being left without access to pension provision. A new paper released by the SPP, titled The Missing Millions: Rethinking Pension Policy for the Self-Employed, calls for a fundamental rethink of how the UK supports those who work for themselves in securing financial stability for retirement.
Under-saving crisis
The Pensions Commission published its interim report in May, detailing the state of retirement saving across the UK. The report emphasised that vast numbers of people are failing to save sufficiently for retirement, especially amongst low and middle earners, the self-employed and women, adding that the system required an overhaul to reflect modern working patterns.
There are currently 15 million people under-saving for retirement, a figure that could rise to 19 million without intervention, leaving significant swathes of the population facing a harsh financial shock when they stop working, according to the Pensions Commission's interim findings.
Helen Morrissey of investment platform Hargreaves Lansdown recently explained: "The self-employed are not covered by auto-enrolment, so all the work of finding a pension provider and investing is down to them. And the result is that the majority just don't." She added: "The problem is likely that saving into a pension means the money is locked away until they're at least 55 (and this is rising to 57 in 2028). For someone with a fluctuating income, like the self-employed, this can cause issues and mean looking for alternative ways of saving."
Mr Bell, who formerly headed up the Resolution Foundation think tank, co-wrote a report in 2023 urging a substantial rise in contributions. It stated: "The success of pension auto-enrolment should be built on, with a 50 per cent increase in minimum contribution rates."
