The government and pensions industry both need to take action to address pension adequacy concerns, the Society of Pension Professionals (SPP) has said, warning that this is “arguably the biggest challenge faced to date”.

In its latest paper, the SPP argued that it is "clear" that the only way the issue of adequacy will be fundamentally addressed is by industry and government working together in partnership.

Given this, it outlined several recommendations for the recently revived Pensions Commission, urging the group to establish a clear definition of “adequate” retirement income and to recommend practical measures for boosting savings and rebuilding public trust.

The paper suggested that the commission should begin by agreeing on a common benchmark for adequacy, drawing together policymakers, employers, and providers to ensure consistent measurement of progress.

It also emphasised the need for the commission to identify both current and future under-pensioned groups and investigate the causes of low participation, as well as the trade-off between short-term living standards and long-term saving, particularly given that the first generation of defined contribution (DC) savers will be retiring without defined benefit underpins.

Public trust was another priority identified in the report, as the SPP urged the commission to assess awareness of state provision and to find ways of strengthening confidence in the system.

It also encouraged the commission to review the complex interaction between private and public pensions and state benefits, considering both the behavioural and financial consequences and identifying steps to reduce friction.

As well as identifying the causes behind pension saving trends and issues, however, the SPP stressed the need for the commission to propose tangible steps to address these concerns.

In particular, the SPP urged the commission to set out a long-term plan for increasing auto-enrolment (AE) contribution rates, including a clear framework and timetable, which
would provide certainty for savers and employers alike to reach an adequate level of contributions.

It also encouraged the commission to consider recommending the extension of AE to the self-employed, to address the steep decline in savings amongst this group.

The report said the commission should also explore the integration of short-term and long-term savings schemes by commissioning feasibility studies and economic assessments of allowing limited access to pensions for purposes such as debt repayment or mortgage deposits.

Alternative pension structures could also be considered, as the SPP encouraged the commission to consider increasing the availability of pooling arrangements by expanding the list of authorised benefits provided by pension schemes and promoting the delivery of collective DC schemes.

The paper also called for specific efforts to help disenfranchised groups, arguing that the commission should recommend that the government modify the rules for means-tested benefits rules to ensure pension contributions do not disproportionately reduce benefit entitlements, increase pension awareness, and introduce transitional assistance.

In addition to this, the SPP called for better recognition of the 2.3 million unpaid carers who receive no income, including consideration of a carers’ credit and increased tax relief limits.

The paper also demanded progress on closing systemic pension gaps across gender, ethnicity, LGBTQ+, and disability, with both industry and government encouraged to improve communications and address inequalities in scheme design.

It also encouraged the government to consider examining the potential for pension sharing on separation and amending the high-income child benefit charge.

Although much of this will require government and industry to work together, the SPP argued that there are areas where industry can act immediately, rather than awaiting the commission's findings.

This included work to improve awareness of pension saving, identify under-pensioned groups, review scheme design to close gaps, and use technology such as generative AI responsibly to enhance engagement.

Employers, meanwhile, were urged to expand their role in supporting workplace saving and to embed financial education, with the government called on to create a stable policy environment to support this.

Commenting on the report, SPP president Sophia Singleton said: “The SPP hopes that this wide-ranging paper proves useful in stimulating debate, thought, and most importantly, action, on what is arguably the biggest pensions challenge faced to date.

"As this paper makes clear, government, industry, and savers can all do more, and we all need to if we are to achieve the shared goal of an adequate retirement income for all.”

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