A new report from the Pensions Commission warns that at least 15 million Britons are not saving adequately for retirement, with the figure potentially rising to 19 million without action. The crisis is particularly acute among low- to middle-earners and the self-employed, as only 4% of the latter group contribute to a pension.
Auto-enrolment, introduced under the last Labour government and implemented by subsequent administrations, has brought millions into the pension system. However, about half of those enrolled are only contributing the minimum required amounts—currently 8% of total earnings split between employee and employer. The report also highlights a stark gender gap, with women approaching retirement holding only half the private pension wealth of men.
The shift from defined benefit schemes, which guarantee a set income for life, to defined contribution schemes has exacerbated the problem. In modern schemes, retirees can only access what has been paid in plus accrued interest. Stagnant wages and rising housing costs have left many households with little surplus cash to top up private pensions.
Paul Lewis, presenter of BBC Radio 4's Money Box, described auto-enrolment as a 'great idea' but noted that minimum contribution levels are set to be affordable for employers, not sufficient for retirement. The Pensions Commission is calling for a 'renewed national settlement' to address these systemic failings.
