The Pensions Management Institute (PMI) has expressed disappointment at the omission of the expected Pensions Adequacy Review from the chancellor’s speech at Mansion House last night.
The institute said the “silence” on the issue “marks a missed opportunity to address the long-term adequacy and sustainability of the UK’s pensions system”.
It said the review was a critical moment to rethink how the industry can support people across their financial lives, and urged the government to “reassert its commitment” to the issue.
Helen Forrest Hall, the PMI’s chief strategy officer, added: “Retirement adequacy cannot be solved in isolation.
“We must break down product silos and build a lifetime savings framework that reflects how people actually live – balancing pensions, ISAs, housing and emergency savings.”
Lack of adequacy measures a ‘notable omission’
Addressing representatives of the financial services industry at Mansion House in London last night, chancellor Rachel Reeves focused on new reforms aimed at increasing the global pull of the UK’s financial services sector, as well as an overhaul of risk warnings to encourage individuals to invest more.
This is despite intense speculation in recent days that the government would use Reeves’ appearance to unveil the Pensions Adequacy Review.
In the final report of the Pensions Investment Review, published at the start of June, pensions minister Torsten Bell stated that the second phase of the Pensions Review, focusing on outcomes, would launch “in the coming months”.
This will look in depth at how the three main “pillars” of the pension system interact: the state pension, workplace pensions, and personal pensions.
Rebecca Williams, financial planning divisional lead at Rathbones, said: “A notable omission from the speech was any concrete plan to roll out phase two of the long-awaited pensions review - the part that tackles adequacy and could place greater responsibilities on employers to boost pension contributions.”
She said that some companies could see this as “a form of short-term respite” after national insurance contributions were increased last year. However, Williams said she expected further pension reforms to “resurface when the economic and political conditions feel less fraught”.
Investment review changes will only go so far
Current and previous governments have claimed that reforms to investment rules and the consolidation of pension schemes will boost retirement savings.
However, Steven Hull, partner in the pensions team at law firm Burges Salmon, said such changes “can only do so much – at the end of the day, there has to be enough money coming into the pension pot in the first place”.
The current administration appears reluctant to raise the minimum auto-enrolment contribution rates, with Torsten Bell reportedly telling an industry conference earlier this month that rates would not rise during this parliament.
Hull pointed out that the government could still enact a 2023 law that would expand the scope of auto-enrolment without raising contribution rates.
“Bringing this into force and laying the associated regulations would be an uncontroversial first step towards beginning to address the adequacy conundrum,” he said.
Hull added that the government might also look at other incentives to boost pension saving, such as ‘sidecar’ savings and salary sacrifice arrangements.
