Pensions industry organisations have warned that further reforms could still be needed to ensure individuals are saving adequately for retirement, after the state pension saw a record increase this week.

The Government previously confirmed it would retain the state pension triple lock, meaning the state pension was due for a record-breaking increase from £9,628 per year to £10,600 per year.

In response, the Pensions and Lifetime Savings Association (PLSA) stated that the Government was right to maintain the triple lock in the face of heightened inflation. However, it argued that in time, the state pension should be reformed and set at a sufficient level to protect everyone, especially under-pensioned groups, from poverty.

“Alongside further state pension reform, the PLSA is calling for a timeline to set out a gradual rise in automatic enrolment contributions, over the next decade, so that by the early 2030s, they will increase from 8% to 12%, and contributions are split evenly between employers and employees,” PLSA director of policy and advocacy, Nigel Peaple, commented.

“We also want to see the scope of the system expanded to improve savings amongst those not already included.

“A bill has already been laid to allow a younger cohort (18 to 22) to qualify for automatic enrolment and begin from the first pound of earnings, however, the biggest lever Government can pull to meaningfully improve the retirement outcomes of millions of savers, is to set a timeline for increasing the minimum pension contributions paid into a worker’s pension by employers.”

Phoenix Insights director, Catherine Foot, argued that serious questions remain around the long-term funding challenge of the state pension, noting that costs are set to balloon in the coming decades as our younger wave of baby boomers reach state pension age and live longer in retirement.

She said: “The state pension has become a political hot potato with decisions delayed until after the next election.

“However, it’s likely we will see an acceleration of the state pension age increase to mitigate costs, so it’s critical those unable to stay in work, such as people with ill health, are supported to ensure pre-retirement poverty doesn’t spiral out of control.

“Even with a future commitment to the triple lock, relying solely on the state pension will leave people short of a decent standard of living in retirement.

“Given there is a significant knowledge gap among the public, we need better communication to engage people with how much the state pension will provide and what age they can access this.”

Industry organisations have also raised concerns that the triple lock could be in jeopardy in future, as the recent independent review into the state pension age recommended that the Government set a limit on state-pension related expenditure of up to 6% of GDP.

“To stick to this strict budget, the government would face an unenviable choice as the population ages, choosing between raising the state pension age as high as 74 for current 30-year-olds or cutting back on the triple lock commitment,” Interactive Investor head of pensions and savings, Alice Guy, added.

“If the proposals to cap state pension spending are adopted, the report reveals that someone currently aged 30 or younger could be waiting until aged 74 to receive their state pension. This would mean they miss out on eight years of state pension compared to current pensioners, worth £209,432 by 2067.

“Although these proposals seem shocking, these regular state pension age reviews are needed to make sure the government is realistic about their future commitments, so the state pension remains affordable.”


This article first appeared on our sister title, Pensions Age.

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