The government has been urged to take “bold action” in its upcoming pension adequacy review, with particular calls for the government to implement the 2017 auto-enrolment review recommendations and build a consensus on what adequacy means.

Chancellor, Rachel Reeves, is reportedly expected to announce the launch of the second phase of the pensions review, focusing on pensions adequacy, at her Mansion House speech later this month, alongside plans to examine the state pension.

Industry experts have been sharing their hopes for the review in anticipation, with Aegon urging the government to use the second phase of the review to define what exactly pension adequacy means and to take steps to reduce pension inequalities in the UK.

In particular, Aegon encouraged the government to build a consensus on what an adequate retirement is, and to carry out a detailed analysis on how much people need to save to achieve this.

It also urged the government to implement the long-awaited 2017 auto-enrolment review recommendations, as well as expand the upper age to age 75 to reflect the fact that people now have longer working lives.

In addition to this, Aegon said that the government should introduce a pension solution for the self-employed using the principles of auto-enrolment principles.

Commenting ahead of the review, Aegon head of pensions, Kate Smith, said: “This is a pivotal opportunity to reach a consensus on what constitutes an adequate retirement income.

“The pension review is an opportunity to really move the dial on pensions adequacy for this and future generations of pension savers before it’s too late.

“Adequacy isn’t the same ‘number’ for everyone – it should be linked to replacing a proportion of working age earnings, so will vary between groups of individuals, based on their earnings and their personal circumstances.

“We urge the pension adequacy review to carry out a detailed analysis of how much people need to save to achieve an adequate retirement income. This could also inform any future increases to auto-enrolment contributions.

“Once individuals understand what might be an adequate retirement income for them, the industry can offer guidance, possibly through targeted support, around whether they need to contribute more to achieve this.”

She also argued that the auto-enrolment reforms in particular are “needed more than ever”, with the Pensions Minister having seemingly ruled out any increase in minimum auto-enrolment contribution rates during this parliament.

“Remaining stuck at 8 per cent of a band of earnings for the foreseeable future means auto-enrolment is unlikely to deliver adequate retirement income savings for all but the lowest earners. Yet most are in the dark about how much they need to save above the minimum,” she warned.

“Currently too many people are excluded from auto-enrolment as they are too young, too old, don’t earn enough or are self-employed.

“Implementing the 2017 reforms to auto-enrolment would go some way to reducing pension inequalities, including closing the pension gender gap, by helping more people to save more, earlier, and for longer.”

This was echoed by RSM UK head of pensions, Ian Bell, who argued that “it’s widely recognised that the 8 per cent of salary currently paid in through auto-enrolment is inadequate”

However, he warned that the timing of any increase in auto-enrolment contributions will be critical to its success, acknowledging that the chancellor has little fiscal or economic headroom at present.

“While employers are already squeezed by the rise in employers’ national insurance contributions and the increased national minimum wage, employees are also feeling the pinch from the cost-of-living crisis,” he continued.

“Pushing too far too fast risks increasing opt out rates and undermining the success achieved in increasing pensions saving so far. We may therefore see any timeline for this particular issue pushed into the future, as businesses and workers could both struggle to absorb any short-term increased costs. “

“With little wiggle room the chancellor may end up setting a long timeline for any changes to auto-enrolment."

---