The government’s adequacy review on pensions “cannot come soon enough”, the Pensions Policy Institute (PPI) has said, after its UK framework revealed performance in the UK pensions system has “stalled”.

In particular, the annual update to the UK Pensions Framework showed that adequacy and fairness remained weak components, and the gap between sustainability and adequacy is widening.

PPI head of policy research and lead author of this year’s framework, Priya Khambhaita, said: “Performance in the pensions system has stalled since 2022, and key objectives - adequacy and fairness - continue to be weak.

“The second phase of the pensions review must consider more flexible structures that support adequacy, while avoiding adverse impacts on different generations and underpensioned groups.”

She said that so far, the reform agenda has focused on improving investment returns and stimulating economic growth.

However, Khambhaita noted that savers can only benefit from investment performance if they save early and consistently, emphasising: “To prevent ongoing missed opportunities, the focus must now shift toward adequacy”.

The framework, sponsored by Aviva, tracks and simulates how the UK pension system is performing against a set of core objectives that determine the financial security people have in later life.

For the first time since its inception in 2022, the framework wheel has undergone a comprehensive refresh, with three of its 41 indicators showing improvements, and another three weakening.

Each indicator contains quantitative and qualitative metrics that are used in combination to assign a score out of six, which is used to classify the extent to which outcomes are providing support for their system objective.

The report showed that pensioners continue to have the highest levels of home ownership, while ownership rates among working-age individuals remain lower.

However, it also found housing affordability has improved since the peak of the affordability ratio during the COVID-19 pandemic, returning to levels similar to those seen around a decade ago.

Scheme sustainability was another indicator that improved, as the report suggested that schemes are well funded, with the majority of defined benefit (DB) schemes in surplus.

In addition to this, the increase in members due to auto-enrolment has resulted in an increase in the scale of defined contribution (DC) schemes.

The report highlighted that UK public spending on state pension and other pensioner benefits has risen at a slower rate than the total received in national insurance contributions (NICs) since 2015-16.

PPI said that spending trends concerning NICs and GDP indicate measures designed to improve sustainability are beginning to take effect.

The framework also highlighted three indicators that weakened, which included employment rates, change in retirement income, longevity and population ageing.

Employment rates are below record levels, and the amount of adult life spent in work has remained steady while life expectancy has edged upwards.

This has resulted in workers needing to save relatively more during their working years to achieve the same retirement outcomes.

Starting from the 2020/2021 period, there has been a decline in net incomes, with the most recent full-year data for 2022/23 showing incomes that are approximately equivalent to those of 2017/2018 when adjusted for inflation.

The report also highlighted that following the COVID-19 pandemic, there has been a fall in healthy life expectancy, alongside an increase in economic inactivity and population ageing, signalling a risk to pension system sustainability.

Commenting on the framework, Aviva managing director of wealth and advice, Michele Golunska, said: “We’re pleased to once again support the PPI’s important work through its latest UK Pensions Framework report.”

Golunska argued that with major policy changes on the horizon through the Pension Schemes Bill, the industry has a “unique” opportunity to "get ready" for the future and to ensure the system works for every generation.

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