The Department for Work and Pensions (DWP) will soon examine key policy changes around "the balance of state and private pensions", following recommendations from a pensions commission. Current eligibility rules could be expanded to help ensure people have enough income for retirement.
Commission to present final report
The pensions commission will present its final report to the Government, including a list of recommendations. Labour tasked the group to study the current landscape and what changes are needed to ensure people have enough income in retirement.
Professor Nick Pierce, one of the three commission members, recently spoke to the BBC's Money Box show about their work to date. The group is set to present its final recommendations to the Government in Spring 2027.
Defining adequate pension income
Professor Pierce outlined the type of suggestions they will put to the Government. He said: "We will be setting out in our final report very clearly what we think adequate pension income looks like for people in retirement in the 2030s and beyond."
"And we will be working back from that to say, what does that mean for auto-enrolment in particular, and what does it mean for the balance of state and private pensions, and how do we plot a path to getting to those adequate incomes? We're definitely going to be doing that; that's the core of what we're doing."
State pension and triple lock
An interim report from the commission said that the state pension is "the backbone of retirement for almost every pensioner". The DWP benefit currently pays £241.30 a week at the full new rate, worth almost £12,550 a year.
State pensioners are guaranteed an increase to their payments each year in line with the triple lock. This policy mandates that payments increase by the highest of 2.5 per cent, inflation or the rise in average earnings.
Auto-enrolment expansion under consideration
Professor Pierce told the BBC programme that while there has been "real success" in modernising the state pension system, there has not been the same improvement in rates of saving through workplace pensions. Auto-enrolment is a policy that means eligible workers are automatically enrolled into a workplace pension and pay in a minimum level of contributions.
The policy expert was asked if the commission is looking at expanding auto-enrolment rules. He said: "We're certainly looking at exactly those rules about when people start to contribute to a pension, the qualifying earnings on which they contribute, and the levels of their contributions."
"Because precisely as you say, at the moment there are people who are excluded from pension savings by virtue of low earnings or time out of the workplace. And there are others, like the self-employed, who we haven't got a mechanism for bringing into auto-enrolment."
"And the rates are such that if you're a low earner, in particular a median earner, you're only going to be paying at the 8 per cent level."
Under auto-enrolment, you have to pay in the equivalent of at least 8 per cent of your qualifying income. This is often made up of a 5 per cent contribution from the employee with a 3 per cent contribution from the employer. You can arrange these amounts in different ways as long as you reach the minimum 8 per cent, and you can also arrange to pay in more, or the employee can choose to leave the scheme if they decide.
