DWP pensions warning as workers risk poverty in retirement
Experts have warned that people looking to retire in 2050 are on course to receive £800 per year less than current pensioners.
The Department for Work and Pensions (DWP) said 45% of working-age adults were putting nothing into their pensions.
Work and Pensions Secretary Liz Kendall said she was turning to the Pensions Commission, which last met in 2006, to 'tackle the barriers that stop too many saving in the first place'.
Her decision to revive the Pensions Commission has been broadly welcomed by the pensions industry
The previous commission recommended automatically enrolling people in workplace pensions, which has seen the number of eligible employees saving rise from 55% in 2012 to 88%.
DWP analysis suggested 15 million people were undersaving for retirement, with the self-employed, low paid and some ethnic minorities particularly affected.
Around three million self-employed people are said to be saving nothing for their retirement, while only a quarter of people on low pay in the private sector and the same proportion from Pakistani or Bangladeshi backgrounds are saving.
Women face a significant gender pensions gap, with those approaching retirement in line to receive barely half the income that men can expect.
Pensions minister Torsten Bell says: 'The original Pensions Commission helped get pension saving up and pensioner poverty down. We need reforms that enable more people to build a decent standard of living, and we need them sooner rather than later
'But if we carry on as we are, tomorrow's retirees risk being poorer than today's. So we are reviving the Pensions Commission to finish the job and give today's workers secure retirements to look forward to.'
The commission will be led by Baroness Jeannie Drake, a member of the previous commission, and report in 2027 with proposals that stretch beyond the next election.
Ms Kendall's decision to revive the Pensions Commission has been broadly welcomed by the pensions industry.
Kate Smith, head of pensions at Aegon, urged the commission to make 'bold, brave and possibly unpalatable recommendations', including 'significant increases' to auto-enrolment contributions after 2029.
She also called on the commission to look at wider issues, saying: '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.'
This Pensions Commission - which will bring together unions, employers and independent experts - is a vital step forward.
AgeUK's Caroline Abrahams said the commission needed to address the state pension, which provides the bulk of retirement income for most pensioners.
She says: 'If we're to avoid future generations of pensioners experiencing financial hardship, we need reforms that enable more people to build a decent standard of living, and we need them sooner rather than later to maximise the numbers who can be helped.'
Ministers hope the Pensions Commission will build a consensus around changes, as its predecessor did, working with businesses and trade unions.
Rain Newton-Smith, chief executive of the Confederation of British Industry, said the 'only route' to higher living standards in retirement was through 'higher growth, productivity and better savings'.
She adds: '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.'
Paul Nowak, general secretary of the Trades Union Congress, says: 'Far too many people won't have enough pension for a decent retirement, and too many – especially women, BME (black and minority ethnic) and disabled workers and the self-employed – are shut out of the workplace pension system altogether.
"Under Labour, pensioners are regarded as cash cows. Which is why it has come as little surprise that Rachel Reeves is looking to raise taxes on pensioners to plug the black hole she has dug herself.
"That's why this Pensions Commission – which will bring together unions, employers and independent experts – is a vital step forward.'
Recommended reading:
But shadow chancellor Sir Mel Stride accused Labour of pushing the issue 'into the long grass'.
The MP says: 'The reality is they have piled up burdens on employers and workers, and that is why they have launched a pensions commission which will take years to report back and will only look at changes beyond the end of this decade.
'Conservatives in government introduced automatic enrolment which has revolutionised our pensions landscape. We should be building on that success, but now businesses and savers cannot afford to put more into pension pots thanks to Labour's reckless policies.
'Under Labour, pensioners are regarded as cash cows. Which is why it has come as little surprise that Rachel Reeves is looking to raise taxes on pensioners to plug the black hole she has dug herself.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Telegraph
42 minutes ago
- Telegraph
Britain's pension crisis is about to get even worse
The Government's review of pensions is asking some of the right questions. Top of the list is the age at which they should start to be paid. It is not a given that the state should fund the last third of someone's life, regardless of need. That is a choice, and a recent one. When the Old Age Pension began in 1909, it was paid from 70 and you had to have lived in the UK for 20 years and to be of 'good character'. It was means-tested, too – you needed to earn less than £21 a year to qualify. So, Liz Kendall, the Work and Pensions Secretary, is right to look first at the state pension age. And right to commission a report on the proportion of adult life spent in retirement. When the modern state pension was introduced in 1948, a 65-year-old could expect to receive it for just 13 years, about a sixth of their life expectancy. She is right, too, to investigate ways to boost pension savings – 8pc of earnings is not enough – and to broaden the number of people putting money aside for their retirement. Only half of working-age people are doing that, a fifth of the self-employed and fewer still of some ethnic minorities. That's not good. As ever, when it comes to pensions policy, there is also a have-cake-and-eat-it problem. The Government spends about 5pc of GDP on pensions – more than £120bn last year – but it persists with the fantasy that the amount paid to pensioners can rise into the future by the highest of earnings, inflation or 2.5pc. The triple lock is unaffordable. The unavoidable truth about pensions is that small changes in a range of unpredictable variables make a big difference when they are compounded over the decades that we now expect to live after we have stopped working. This is true for the good changes that government policy and personal choice can deliver. And for the bad ones that we can't do much about. That's why the Government is asking only some of the right questions. There are others it needs to address, all of which are difficult. The biggest pensions challenge may well be one that no one is talking about. This all became abundantly clear to me recently when I helped a colleague out with a deceptively simple question. He wanted to know what rate of investment return he needed to aim for in order to achieve the comfortable retirement he was hoping to enjoy. To answer that, I employed my pathetically rudimentary Excel skills to build a spreadsheet with a few variables that we could play with until we arrived at a plausible plan. I plugged in how much he had saved; how much he intended to put aside in future, and for how long; when he planned to wind down into semi-retirement and when he would stop completely; when he would take the state pension; and the return he would aim to achieve on his investments both before and after he stopped working. I ran the numbers from his current age of 52 until, with luck, he turns 90. Crucially, I had to make some quite big assumptions, the most important of which were that the triple lock would continue throughout his life and that the Bank of England would succeed in hitting its 2pc inflation target. By tweaking all these variables and assumptions, we were able to monitor their impact on the cumulative size of his pension pot. As you might expect, saving more for longer in an only moderately inflationary environment ended well. Working for a bit longer made a big difference. Accepting a lower income in retirement helped. None of this is rocket science, and probably doesn't require a Pensions Commission to confirm. That said, I was surprised by some of the things we discovered. One was the remarkable power of starting early. The principal reason that my colleague was pleasantly surprised by his required rate of investment return was that he had spent the previous 30 years studiously paying into his company pension, supported by a generous employer. The first additional question the Government needs to find an answer to is how to get young people engaged with their pensions. It may be boring, but it is not as boring as being old and poor. The second thing the spreadsheet taught us was the power of delay. Working just a few more years, even in a part-time capacity, can transform the arithmetic of our pension savings. Paying in for longer and taking out for less time, together with a few extra years of compound investment growth, is a magical combination. Find what you enjoy and keep doing it. But the biggest eye-opener for me was the devastating impact of even a modest uptick in inflation. A quick and easy way to make your money run out is to stop work and then try to maintain your standard of living by increasing the amount you draw down from your pension in line with rising prices. For my colleague, nudging up the assumed inflation rate from 2pc to 3pc was the difference between a £700,000 pension pot at the age of 90 and running out of cash completely a couple of years earlier. The pensions crisis that no one is talking about, therefore, is on the face of it nothing to do with pensions at all. Yes, more people need to save more, to start earlier and to carry on for longer. The Government has a role to play in encouraging all of those. But it, and the Bank of England, has an even bigger task. To keep inflation at a level where it doesn't blow our plans out of the water.
The Independent
10 hours ago
- The Independent
How does Britain's pension predicament compare with other countries
Liz Kendall announced this week that she is reviving the pension commission as the government tries to tackle what she described as a looming 'tsunami of pensioner poverty'. The work and pensions secretary said the government is setting out to 'tackle the barriers that stop too many saving in the first place' after her department found that people retiring in 2050 are on track to be poorer than those retiring today, expecting to get £800 less in private pension income. Currently, just 55 per cent of working age adults in the UK are contributing to a pension pot, and MPs have said that a UK-wide strategy is needed to address pensioner poverty. But the UK's pension dilemma is not unique. Countries across the world are grappling with similar looming crises, driven by a combination of factors including demographic shifts, low interest rates and economic instability. Here, the Independent takes a look at what action other governments are taking to stave off the impending crisis. United States In the United States, half of all private-sector workers are unable to get a retirement plan through their jobs, according to a survey published in June by Pew Charitable Trusts. The US's most common workplace retirement plan is a 401(k), which allows employees to voluntarily put money aside for retirement which is typically matched by their employers. The total employee and employer contributions to a 401(k) cannot exceed $70,000 per year. Around 27 per cent of Americans over the age of 59 have no savings to rely on in their retirement, according to a survey by financial services firm Credit Karma in 2023. Last week, the Wall Street Journal reported that the Trump administration was expected to sign an order that would open up 401(k)s to the private markets. It would order the US Labor Department and Securities and Exchange Commission to create guidance for employers on including private assets in 401(k) plans, which could, in turn, create more investment opportunities for them. Canada Currently, the key challenge for many countries remains the low rate of pension saving. More than half (59 per cent) of working Canadians do not believe they will have enough money to retire, according to a survey conducted this year by Canadian pension fund HOOPP, Healthcare of Ontario Pension Plan. However, Canada is tackling this through rate increases within their savings system. The government has expanded the Canada Pension Plan (CPP), a monthly benefit that replaces a percentage of a person's income after they retire. Between 2019 to 2025, it has increased the percentage of how much of a worker's earnings are replaced from 25 per cent to 33.33 per cent. It has also increased the maximum level of earnings protected by the CPP by 14 per cent over 2024 and 2025. Australia Australia is recognised as having one of the world's top pension schemes where employers are required to pay a percentage of their employees earnings into an account which that employee can then access once they have retired. As of this month, employers are now required to contribute 12 per cent to employees' retirement savings accounts, up from 11.5 per cent. They are also taking steps to close the gender pension pay gap with the Labor Government introducing a superannuation top up for parents taking time off to care for a newborn. The CityUK CEO Miles Celic said: 'total contributions will have to rise if we are to emulate the successes of, for example, Australia and Canada. 'This will involve difficult political choices alongside technical changes to policy and regulation.' France In 2023, French President Emmanuel Macron raised the age of retirement from 62 to 64, which sparked massive public backlash and protests. Macron's administration argued that the reform was essential to prevent long-term deficits in the pension system. At the time, Macron said he did not enjoy passing the reform but called it a necessity, saying 'the longer we wait, the more (the deficit) will deteriorate.' As well as increasing the age of retirement, France has also hiked the minimum contributory requirements by 2 per cent this year across all bands. The minimum contribution applies to retirement pensions under its Pension Insurance scheme. In Germany, the retirement age is gradually being raised from 65 to 67. Like many governments across Europe, it is trying to reduce pressure on the pension system created by aging populations. Last year, it approved pension reform and its new government has set out a series of policies that include maintaining the amount paid to retirees each month - which is 48 per cent of the average monthly salary.
Scottish Sun
17 hours ago
- Scottish Sun
Major update as 600,000 households owed up to £12k in PIP cash following errors – could you be owed cash?
Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) HUNDREDS of thousands of benefit claimants could still be owed cash from the Government after a payment error. The Department for Work and Pensions (DWP) has spent years reviewing the cases of people who could have been underpaid. Sign up for Scottish Sun newsletter Sign up 1 You could be owed cash by the Government if your PIP was underpaid In a new update, it said an estimated 633,338 households receiving Personal Independence Payments (PIP) are thought to have been affected. The Government department says it has reviewed 308,665 records in the time up to March this year. A huge £250million has already been paid out to PIP claimants who were missing cash. But that leaves a whopping 324,673 cases still expected to be reviewed. The review was launched after a Supreme Court judgment in July 2019 that changed the way the DWP defines 'social support' in one of the assessed PIP categories. Dubbed the "MM judgement", the DWP realised that hundreds of thousands could now be due additional support. It means that people may not have been given one of the two elements of PIP when they were actually entitled to it. Others may have been awarded the standard rate but should have received the enhanced rate, which is a higher amount. The DWP began its review in 2021, looking at PIP claims since April 6, 2016 to check whether claimants may be eligible for more support. By March last year it had reviewed 219,080 cases. The latest figures suggest it's managed to get through a further 89,585 cases in the last year. Changes to UC & PIP payments in full as Labour reveals bruising welfare bill concessions in bid to quell rebellion People who are found to have been underpaid have been receiving back payments. The amount each person receives will vary but the average payout works out at around £5,285 per claim. The Sun previously reported on one couple on PIP who had been left "shell-shocked" after learning that they were due £12,000 in back payments. What is PIP? HOUSEHOLDS suffering from a long-term illness, disability or mental health condition can get extra help through personal independence payments (PIP). The maximum you can receive from the Government benefit is £187.45 a week. PIP is for those over 16 and under the state pension age, currently 66. Crucially, you must also have a health condition or disability where you either have had difficulties with daily living or getting around - or both- for three months, and you expect these difficulties to continue for at least nine months (unless you're terminally ill with less than 12 months to live). You can also claim PIP if you're in or out of work and if you're already getting limited capability for work and work-related activity (LCWRA) payments if you claim Universal Credit. PIP is made up of two parts and whether you get one or both of these depends on how severely your condition affects you. You may get the mobility part of PIP if you need help going out or moving around. The weekly rate for this is either £29.20 or £77.05. While on the daily living part of PIP, the weekly rate is either £73.90 or £110.40 - and you could get both elements, so up to £184.30 in total. You can claim PIP at the same time as other benefits, except the armed forces independence payment. Make a claim by calling the Department for Work and Pensions (DWP) on 0800 917 2222. Who is affected? There are two elements to PIP - a daily living part if you need help with everyday tasks, and a mobility part if you need help with getting around. Claimants eligible for each element are then awarded a standard or enhanced allowance. You can get the daily living part of PIP if you struggle to carry out "daily living activities" such as bathing or preparing food. Claimants are scored on how able they are to do each task. This determines whether you're able to receive the PIP payment, and if you have a high score you're more likely to be awarded the enhanced payment. The standard allowance for the daily living part of PIP is currently worth £73.90 a week and the enhanced rate is worth £110.40 a week. The 2019 Supreme Court judgment decided that PIP claimants could receive additional points for one of the activities scored - socialising and being around other people. It means that people may have not been entitled to the daily living element of PIP when they were actually entitled to it. Others may have been awarded the standard rate but should have actually received the enhanced rate. The DWP is now reviewing the cases of people who might have been affected by this. However it won't review your claim if: The enhanced rate of the daily living part of PIP has been awarded continuously since April 6, 2016 A Tribunal made a decision on a claim since April 6, 2016 A decision not to award PIP was made before April 6, 2016. New PIP errors The DWP also revealed it had discovered two "new" errors in the last year relating to PIP payments. This includes PIP claimants without a National Insurance number not having their application progressed correctly – despite an NI number not being needed for a claim. Some 455 cases of this were reviewed in the last year with £500,000 paid out. The DWP has also paid out £13million to Scottish PIP claimants who mistakenly saw a "loss of entitlement" when they tried moving over to the Adult Disability Payment (ADP). Almost 4,700 records of this have been reviewed, with another 176 cases still to be looked at. How do I appeal a PIP decision? If you've been contacted by the DWP or think you are affected by the MM judgement, you'll need to appeal your PIP decision. If you think a PIP decision was wrong, you can challenge it. If you've been contacted by the DWP or think your PIP payments may be affected by the MM judgment, you should ask for a "mandatory reconsideration notice". This is where the DWP looks at your claim decision again. If you are still unhappy with this outcome, you can then appeal to an independent tribunal. You must send your appeal form within one month of the date shown on the mandatory reconsideration notice. Be aware that it usually takes up to six months for an appeal to be heard by the tribunal. Before it gets to the tribunal, the DWP can make a revision to the original claim. If you're unhappy with the decision you get from the tribunal, you may also be able to get the decision cancelled - known as "set aside". You'll be told how to do this at the time. Another option is to appeal to the Upper Tribunal (Administrative Appeals Chamber) if you think the tribunal wasn't able to give you proper reasons for its decision, or back up the decision with facts, or if it failed to apply the law properly. Full details about challenging your PIP decisions can be found on
