Aon has warned that the government’s revived Pensions Commission will face major structural hurdles if it hopes to deliver meaningful reform to the UK’s pension system.
In a new paper exploring the aims of the Pensions Commission, Matthew Arends, head of UK retirement policy at Aon, argued that the commission’s narrow remit may stop it from addressing the root causes of poor retirement adequacy.
He warned that by being instructed to “build on the foundation of the state pension” rather than review it, the commission could miss the “most significant driver of retirement outcomes for those at greatest risk”.
Suzy Morrissey of the Pensions Policy Institute has been tasked with reviewing the state pension age, work that is being carried out separately from the Pensions Commission.
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Arends outlined six challenges facing the commissioners, including defining what counts as an adequate pension, improving outcomes for low earners, and tackling poor financial literacy and engagement.
“Ongoing oversight and periodic commissions are essential to maintain a pensions framework that is strong, fair, and sustainable for future generations.”
Matthew Arends, Aon
He emphasised that these areas would be central to any meaningful progress, arguing that reforms must be nuanced and flexible to reflect the diverse circumstances of savers rather than relying on one-size-fits-all contribution increases.
Other challenges Aon’s report highlighted included the long-term sustainability and affordability of the UK’s pension system, and broader financial literacy and engagement issues.
The paper also called for regular reviews to ensure the system keeps pace with demographic and regulatory change, suggesting that the next Pensions Commission should be convened within 10 years rather than waiting decades.
“The challenges are significant, including the decline of defined benefit pensions, the rise of collective defined contribution schemes, technological advancements, and the increasing age profile of the workforce,” Arends said.
“Ongoing oversight and periodic commissions are essential to maintain a pensions framework that is strong, fair, and sustainable for future generations.”
