The government should consider introducing pension reforms such as a restructured state pension with means-tested later-life supplements or the introduction of a universal employment pension (UEP) to guarantee a basic income, an industry report has said.

The report, which builds on the annual Bloomfield Lecture delivered by pensions actuary and financial wellbeing consultant, James Smith, and investment actuary and defined contribution (DC) pension fund manager, Alexandra Miles, warned that the UK’s retirement system is built on outdated assumptions.

In particular, the report argued that whilst the system assumes that people retire at 65, live modestly for a decade, and that state and workplace pensions will suffice, "that era is over", with longer lives, rising inequality, insecure housing, and fragmented savings.

It also suggested that those who need most often get least, warning that homeownership now drives financial security more than income, with renters and women facing significantly higher retirement shortfalls to meet the same objective of dignity in retirement.

Given these concerns, Miles and Smith outlined a number of "bold but achievable" reforms, within auto-enrolment boundaries, intended to help improve the efficiency and sustainability of the UK's retirement system.

In particular, the pair called for a restructured state pension with means-tested later-life supplements, suggesting that this could save government up to £34bn a year.

Alongside a reformed state pension, it suggested introducing a UEP to guarantee a basic income, indexed to the minimum income standard.

It also encouraged the government to use existing infrastructure and evolving regulation – like the National Wealth Fund and multi-employer collective DC (CDC) rules – to align pensions with UK growth, suggesting that this could unlock up to £25bn a year.

It also encouraged the government to introduce default sidecar saving to boost today’s resilience and tomorrow’s security, without harming retirement outcomes.

Smith stated: “Our retirement system remains tied to rigid thresholds and averages, failing to reflect real lives.

"This report reimagines retirement across four phases: the phase-in, the white-linen years, the television years, and the increased dependency years.

"Each builds on the last and is rooted in delivering financial security before enabling financial ability, flexibility and contingency.”

Adding to this, Miles said: “The recommendations in our report are focussed on securing dignity for all in retirement, and preparing for 100-year lives. But we are clear that achieving reform cannot rest solely with individuals.

"Employers and the state must step up, with systems fit for modern life, not Victorian ideals. Lifelong financial independence shouldn’t be a privilege. It should be a right,”

ACA chair, Stewart Hastie, also welcomed the report, stating: “Both the lecture and the report look to the huge challenges we face as a society both today and more so in the years ahead.

"Unrestrained by the kind of restrictions Government tends to apply to reviews, whilst the report’s proposals are not ACA policy, we warmly welcome the refreshing ideas that have emerged.”

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