The Institute and Faculty of Actuaries (IFoA) has outlined key recommendations to create an inclusive pension system fit for the 21st century, after its research suggested that the current system is putting a growing number of people at a "systematic disadvantage".

The IFoA's report, produced in partnership with Ipsos, suggested that pension gaps are being driven by the design of the current pension system, which does not reflect modern working patterns for an increasing ​number of people. 

It explained that the current system assumes long, uninterrupted careers with one employer, which "systematically disadvantages" people who are self-employed, work part-time, or need to change their job pattern. 

According to the report, these groups are more likely to feel disconnected, overwhelmed, and unsupported in planning for retirement, putting them at a greater risk of retirement poverty.

Indeed, it pointed out that whilst self-employed workers make up 14 per cent of the UK workforce, less than a fifth (18 per cent) are saving for retirement compared to 90 per cent of employees.

Given this, the report, which builds on the first phase of the IFoA’s work in this area, which investigated potential barriers people face when saving for retirement, outlined a series of recommendations targeted at government, industry, and consumer representatives, to adapt and evolve a system so that it remains fit for the future. 

In particular, the IFoA encouraged the government to enable pension savings for the self-employed via flexible auto-enrolment schemes, and also called for more proactive employer and provider communications and support around the impact of life events such as parental leave or reduced working hours.

In addition to this, it encouraged the government to explore the potential of supplementary and complimentary community-based pension models.

The report also called for a national pensions’ literacy strategy, building public confidence and ownership of pensions choices; for example, most participants in the research mentioned their bank, but no one named their pension provider, indicating a lack of visibility and connection with pension products.

“The current pensions system was a fantastic invention of a different era. Increasing numbers of modern working lives are fragmented, diverse, and uncertain at the individual and household level. They no longer fit the mould of a long, uninterrupted career with one employer," IFoA pensions gap working party chair, Alexandra Miles, said.

“This report shows that pension gaps are often not caused by individual choices alone – they are embedded in systemic design.

“Our hope is that these findings and recommendations spark urgent, practical action to evolve and adapt a pensions system so that it remains fit for the 21st century – and one that supports dignity, security, and purpose for everyone.”

Pensions Minister, Torsten Bell, also highlighted the report as an "important contribution" to debates about how the pensions system could be reformed to ensure more people can look forward to a secure retirement. 

“We have revived the Pensions Commission to put Britain back on track for a stronger and fairer pensions system," he continued. 

Adding to this, IFoA president, Paul Sweeting, said: “Working lives today look different compared to when the current pensions system was first developed.

"It is incumbent on all of us – industry, government, and consumer representatives to make sure that we have a pensions system that provides financial security for all in retirement.

“This research is an example of the important work actuaries do in the interests of the wider public.

"By collaborating with a diverse range of industry experts from across the pensions landscape, to combine human insight with actuarial modelling, we have produced evidence-based recommendations to build a pensions system that is inclusive, flexible and fit for the 21st century."

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