Renewing the social contract on retirement: Liz Kendall on the Pensions Commission

Being retired should be a time of great joy – when, after all your hard work, you finally have the time to do the things that you love, with the people you love. But the truth is, this is not the reality facing far too many of our fellow citizens.

So alongside protecting today’s pensioners – through the pensions triple lock – we also need to renew the social contract for tomorrow’s pensioners.

The last Labour government lifted one million pensioners out of poverty, halving pensioner poverty from its mid-1990s peak, especially through pension credit, which transformed the incomes of the poorest pensioners. We achieved major improvements for future pensioners through the groundbreaking work of the Pensions Commission [of 2002-2006].

This commission’s proposals, legislated for by a Labour government, and [which] continued under those that followed, delivered the new state pension, which is fairer and more generous to those who had previously lost out, especially women.

It [also] led to 10 million more people saving into a workplace pension and benefiting from employer contributions, through auto-enrolment.

The success of the first Pensions Commission

The original Pensions Commission was a huge public policy success. Why? Because it was founded on rigorous evidence and the facts; based on a strategy of consensus building, with genuine engagement of all the major stakeholders, employers and employees; and driven by strong leadership from the three superb commissioners – Adair Turner, Jeannie Drake and the much-missed John Hills.

A generation on, we need to take this approach again. Because – despite the success of auto-enrolment and the progress on the state pension – the job is not yet done.

Put simply, unless we act tomorrow’s pensioners will be poorer than today’s.

Because people who are saving, aren’t saving enough for their retirement. And – crucially – because almost half of the working age population isn’t saving anything for their retirement at all. That is some 18 million people.

The opposite of the promise on which the welfare state was founded. Not what the Turner Commission envisaged. and an outcome this Labour government cannot and will not accept…

Rather than having a secure, reliable pension income for life, many people now retire with a savings pot, leaving them with complex decisions about how to deploy their pension wealth – often without much help at all. Three-quarters of people with savings pots don’t have a plan, and half of all savings pots are now being taken as cash.

A pathway to sustainable reform

Now the message from all of these challenges is clear. If we fail to act, too many future pensioners will face incomes that are too low, risks that are too high and a system that is too unequal.

This Labour government will not duck the urgent need for reform, because we will all end up paying the price if we do.

That is why I am very proud today to announce that we are reviving the Pensions Commission. Tasking it to confront these challenges, build consensus about a long-term pathway of sustainable reform, and finish the job it started 20 years ago…

I have asked them to set out a long-term route map to deliver adequate incomes in retirement for future pensioners, based on the state and private pension systems working in tandem, which has always been the British way.

Now, I’m under no illusions about how difficult this will be. Cost of living pressures mean many workers are more concerned about putting food on the table and keeping a roof over their heads than saving for a retirement that seems a long, long way away.

And many businesses face huge challenges in keeping profitable and flexible in an increasingly uncertain world. That’s why we have already said there will be no change to minimum auto-enrolment contribution rates during this parliament.

The task I and [the] minister for pensions, Torsten Bell, have set the commission is to build consensus about adequacy over the medium and longer term, with a clear timetable.  Because experience from this country, and around the world, shows this is the best way to make sustainable changes to the savings rate.

In doing so, we want [the commission] to propose ways to broaden access and tackle inequalities in pension saving – to help young people, low earners and the self-employed in particular. 

This includes looking at ideas that have already been explored, like lowering the age and earnings threshold at which people are brought into auto-enrolment.

And considering the potential of innovative solutions like sidecar savings, where people save for their pension alongside an accessible liquid savings account, to help them cope with financial pressures without damaging their retirement.

Learning from its previous success, we want the Pension Commission to engage widely and work closely with key stakeholders – in particular, the Confederation of British Industry and Trades Union Congress, which will meet regularly with the commission to support its work.

We expect the Pension Commission to provide its recommendations in 2027.

The new social contract

In conclusion, reviving the Pensions Commission is a crucial part of this government’s commitment to delivering change for all the generations and to reforming our welfare state with a new social contract so it’s fit for the future and lasts for years to come.

Because the one thing I have learnt during my long and busy time as an MP, is that the battle for progressive politics is never won. It needs renewing for each generation. And that requires reform…

Retiring isn’t just the end of your working life; it should be the start of something that is new and joyful.

The Spanish word for ‘retired’ – jubilado – I think that sums it up best. Old age should be jubilant.

And if progressive politics is about anything, it’s about offering hope that tomorrow will be better than today. That will only come when we renew the social contract between the state, citizens, and wider society on which the very future of our country depends. That is what this Labour government intends to deliver.

This is an edited version of the speech. The full version, with some political content redacted, can be found on the Department for Work and Pensions’ website.