Call for a major pension review

The Institute for Fiscal Studies is calling for and conducting its own pensions review in the face of mounting future risks for those now in work.

Keyboard, mouse and pad with retirement planning written in it


The future looks risky at best for many current workers hoping for a comfortable retirement, according to a new report published by the Institute for Fiscal Studies, which is launching a Pensions Review in partnership with the abrdn Financial Fairness Trust.

The report highlights the continued decline of defined benefit (salary-linked) pensions in the private sector, the abolition of state earnings-related pensions, low interest rates, falling homeownership, low typical contributions to defined contribution schemes and a fall in pension saving among the self-employed. It adds that the introduction of pension freedoms has given people flexibility but means there is no longer the same degree of longevity-risk-sharing that defined benefit pensions and annuities provide. It says individuals, rather than employers or insurance firms, now bear the burden of the risk of poor investment performance and uncertain lifespan.

Calling for a major review of pension provision, it outlines some specific risks:

  • Many employees are saving very little for retirement
  • Fewer than one-in-five of the growing number of self-employed workers are saving in a pension.
  • Increasing numbers approaching retirement live in more expensive, insecure, private rented accommodation.
  • Higher state pension ages pose difficulties for many and longevity improvements have not been as big as predicted a decade ago.
  • The demographic and other pressures on the public finances are already considerable, with 24% of adults currently over the state pension age. This is projected to rise to 27% by 2050 and 30% by 2070, putting substantial pressure on public finances.
  • Those retiring with defined contribution pension pots face considerable difficulty and risk in managing their finances through retirement. The report says: “While pension freedoms do give people the opportunity to take control of their own finances, even for the most numerate the decisions on how to draw their pension wealth – which need to be made right through retirement – are difficult.”

The IFS is leading a new multi- year Pensions Review, in partnership with the abrdn Financial Fairness Trust. It will examine the effects of changing economic conditions and public policies on the future of financial security in retirement, including how these effects differ by gender, ethnicity and across the UK.

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