The Institute of Fiscal Studies (IFS) has said that the current pensions system loads “too much risk onto individuals”.

IFS director, Paul Johnson, argued that “a combination of bad design, bad policy, low interest rates and unanticipated increases in longevity have killed our DB pension system in the private sector”.

He continued: “What’s left is a system of individual saving pots. Inadequate contributions accompany very low interest rates; individuals face all the risk of low returns; and, with pension freedoms, very few buy annuities so there is no longevity insurance for most.

“A pension system without any risk sharing is unlikely to be stable in the long run.”

IFS noted that the “collapse” of DB would negatively impact savers and that, although it has been a success, auto-enrolment workplace schemes’ contribution levels are too low and DC schemes put too much risk on the shoulders of members.

It argued that individuals now face longevity and investment risk, and that there is a “real risk” that some will have exhausted their pension savings by the time they come to retire, or that others may be overly cautious and sacrifice their retirement living standards unnecessarily.

Association of British Insurers director of long-term savings, Yvonne Braun, agreed: “I hope this timely lecture brings home the urgency of the situation facing our ageing population. This is a growing crisis that needs a cross-party approach.

“Solutions to how the country cares for its older people and that ensure pensioners can fund their whole retirement need to be found now before it’s too late and we reiterate our call for a Retirement Commission to look at these issues in the round.”

However, The People’s Pension director of policy, Gregg McClymont, said: “This analysis has much to commend but it omits the reality that many workers weren’t invited to the golden age party of defined benefit pensions.

“Auto-enrolment on the other hand has made a positive start towards creating a genuinely mass workplace pensions for the first time.

“The big challenge going forward is to ensure that all the pensions institutions offering auto-enrolment have the scale necessary to deliver efficiently, are governed in their members interest, and that contributions are adequate.”

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