Industry experts have welcomed the news that the government has revived the Pensions Commission to address pension undersaving concerns, describing the relaunch as a "vital step forward".

The government announced today (21 July) that it would be bringing the Pensions Commission back as part of its work to explore the barriers stopping people from saving enough for retirement, with the group set to share its final report in 2027.

The Pensions Regulator (TPR) welcomed this news, with chief executive, Nausicaa Delfas, emphasising that whilst automatic enrolment means that over 11 million more people now save into a pension, many people are heading for an insecure retirement.

"That is why we look forward to continuing to support the government in its mission to address adequacy and encourage industry to engage with the Pensions Commission to make the pension system work for everyone," she stated.

Adding to this, the Confederation of British Industry chief executive, Rain Newton-Smith, argued that "the only route to higher living standards both in work and in retirement is through higher growth, productivity and better savings".

"As we look to the next decade and beyond, finding a consensus across business, government, and our society on how to support people to save by building on the Mansion House reforms can create a pathway to a better future," he stated.

“Taking the time to review the best pathway to achieve this, whilst pursuing broader measures to support growth, will be needed to make it affordable for employers and workers and crucial to the aim of rising living standards, now and in retirement.”

This sentiment was echoed by Trades Union Congress general secretary, Paul Nowak, who said: "Far too many people won’t have enough pension for a decent retirement, and too many - especially women, BME and disabled worker,s and the self-employed - are shut out of the workplace pension system all together.

"That's why this Pensions Commission - which will bring together unions, employers and independent experts - is a vital step forward."

Industry organisations have also welcomed the news, with Nest CEO, Ian Cornelius, agreeing that "we know more change is needed".

"Automatic enrolment has started to improve outcomes, but if we are going to build a pensions system which can truly support low- and moderate-income (LMI) workers it must be tailored to their needs," he said.

“The system must strike a balance between ensuring that working people have sufficient income in retirement and supporting their day-to-day financial resilience before retirement."

In particular, Cornelius said that Nest was "especially pleased" that the commission will look at how the automatic enrolment system can better meet the needs of self-employed workers.

“We look forward to working with the government to explore ways in which the system can better meet the needs of low- and moderate-income workers, building on the successful foundation laid by automatic enrolment," he said.

Aegon head of pensions, Kate Smith, also welcomed the commission's plans to investigate pension inequalities for key groups such as women, the self-employed and ethnic minorities.

"Currently too many people are excluded from auto-enrolment as they don’t meet the current criteria – they’re too young, too old, self-employed or don’t earn enough. This includes those with multiple low-paid jobs, who are mainly women," she stated.

"Sources of inequality and affordability are often linked to the way the labour market works, the housing market, and societal norms, such as women taking on most of the caring responsibilities. These are not issues that can be addressed by pensions policy alone."

Aviva wealth policy director, Emma Douglas, also highlighted the focus on the gender pensions gap as a key area for the commission, noting that progress in narrowing the gender pensions gap has been slow, and without action, parity could remain decades away.

News that the commission will be taking a holistic approach has also been welcomed, with Standard Life Centre for the Future of Retirement director, Catherine Foot, suggesting that "it's vital that the commission takes a step back and looks at the landscape as a whole".

"There’s an opportunity to examine how different elements of the system are working together and to set out a roadmap that can secure the buy-in of employers, as well as savers themselves over the long term," she stated.

"Doing so will involve complex trade-offs, particularly around employer costs and households’ ability to save, but finding a path through these issues will help ensure future generations have good pension outcomes.

“The state pension plays a fundamental role in people’s retirements, so it makes sense that its role is considered as part of the broader question of saving adequacy.

"Any change will need to be very carefully considered, especially as state pension age is due to start rising to 67 next year already. We believe that any proposed change must satisfy the principles of fairness, adequacy, and long-term sustainability."

This was echoed by Pensions Management Institute (PMI) chair, Ruston Smith, who urged the commission to take a broader perspective, considering an individual’s lifetime financial security, not simply pensions in isolation.

However, there are some areas of concern amongst industry experts, as Smith expressed disappointment that there is no mention of the 2017 reforms to auto-enrolment.

"Implementing these could go some way to removing pension inequalities," she stated, also pointing out that, as widely expected, the government has ruled out any increase to auto-enrolment contribution rates this parliament.

"Employers may be pleased about this given April’s increase in National Insurance contributions," she admitted, "but the reality is that without higher pension contributions, mandated or voluntary, many people could face a bleak retirement."

Indeed, Ruston also argued that while the government’s decision not to raise employer contributions provides short-term certainty for businesses, it is "vital "that the commission and government commit to a clear timetable for implementing recommendations.

"The delay following the 2017 review hindered progress; this time, decisive action must follow thoughtful analysis," he stated.

Douglas also stressed the need for auto-enrolment reforms, arguing that auto-enrolment reforms offer a valuable opportunity to accelerate change.

"To ensure success, we urge the government to set out a clear roadmap detailing how and when these reforms will be implemented," she stated.

"A phased approach will give employers and savers the time they need to prepare - helping to secure better retirement outcomes for millions of workers.

Broader changes to auto-enrolment could also play a role in promoting better member outcomes, as Pensions UK chief executive, Julian Mund, confirmed that the association is currently undertaking research to explore how building more flexibility into the automatic enrolment system might deliver better outcomes overall, as an input to the commission's work.

"We are optimistic the commission will make real strides towards delivering a pension system that is adequate, affordable and fair, and stand ready to lend our expertise to the review panel as they tackle these vital issues," he stated.

Concerns over the timeframe for any changes have also been raised however, as Independent Governance Group (IGG) head of policy and external affairs, Lou Davey, said that the final report date of 2027 is “disappointingly still a long way off”

This was echoed by Barnett Waddingham partner, Paul Leandro, who warned that “a final report in 2027 means at least another two year delay before solutions will be implemented - which pushes the timebomb closer to detonation”.

“And while the Pensions Minister’s commitment not to increase pension contributions in this parliament will surely prompt a sigh of relief from employers who are still grappling with the NI hike, the ‘right, long term answer’ will indeed include pushing people from an 8 per cent saving rate to at least 12 per cent,” he stated.

“In all likelihood, the responsibility for that will need to be split between employee and employer.”

But there could be scope for the industry to take action in the meantime, as NatWest Cushon director of policy and research, Steve Watson, argued that “adequacy isn’t simply about legislating for increased contributions”.

“We understand household finances are tight and it’s the same for employers, so as an industry we can’t just wait for minimum contributions to increase, we need to do more to engage people with their pensions,” he stated. “Engaged people are more likely to make better decisions, including voluntarily increasing their contributions.”

---