To ‘finish the job’, address remaining injustices for low earners

The government launched a new Pensions Commission this July, to “finish the job” started by the 2002-06 commission led by Lord Adair Turner.

Commissioners can start by taking a fresh look at injustices faced by those who cannot sustain decent incomes throughout their working lives.

The last pensions commission was a pivotal cross-party success story. One important consequence was government action to address unfairness in state pension entitlements.

Changes to contribution rules mean that younger pensioners today are much more likely to qualify for the full state pension, regardless of their employment history – and so less likely than older pensioners to be in poverty.

Limitations of state pension reform

But many pensioners still face hardship. Recent Fabian Society research found that, even after significant increases, the full new state pension cannot guarantee dignity in retirement.

The state pension has already reached the target set by the last pensions commission – namely, 30% of median earnings. Yet in 2024-25, it was still £1,881 lower than Pensions UK’s Retirement Living Standards – the level the public thought pensioners needed for an acceptable living standard, after rent or mortgage payments.

And raising the state pension even further would still leave gaps. Our analysis found that if everyone received an amount equal to the minimum Retirement Living Standard, one in five private renters and one in 10 social renters would remain in poverty, after housing costs are accounted for.

As such, it is right that the new Pensions Commission is taking a fresh look at financial pressures beyond the state pension. Our research found that almost all (98%) of pensioners living in poverty have private pension incomes of less than £100 per week. But achieving this income threshold has become more challenging as less generous defined contribution pensions have become the norm.

Tackling injustices beyond pensions

Part of the solution is to support longer healthy working lives as the state pension age rises. This should entail reviving proposals from the first Pensions Commission to improve occupational health, as set out in recent Fabian Society research.

“Some people will struggle to save enough without exposing themselves to hardship, such as those who experience reduced earnings because they are looking after young children, caring for a loved one, off sick, or self-employed.”

Sasjkia Otto, Fabian Society

A decent pension will remain out of reach for many who were also penalised under previous state pension rules. Some will struggle to save enough without exposing themselves to hardship, such as those who experience reduced earnings because they are looking after young children, caring for a loved one, off sick, or self-employed. The problem is not that they are imprudent, but rather because of gaps in support.

Poverty during working life is not a reasonable price to pay for dignity in retirement. This is especially important as those on the lowest incomes are less likely to have many healthy years left after they reach state pension age.

So, “finishing the job” started by the first Pensions Commission should mean replicating for private pensions the successes achieved for the state pensions regime – in other words, addressing injustices affecting people who cannot earn consistently throughout their working lives.

To do this, the Pensions Commission should define a target minimum living standard that the government should then seek to enable in retirement. It should set out how private pension savings can help people reach this level in a way that supports financial security throughout working life and retirement.

Broadening the scope of the Pensions Commission

This means that the scope of this Pensions Commission will have to broaden, as with its predecessor.

This time, it must not stop with the state pension. It must also consider the role that the state and employers have in building private pension contributions when people aren’t earning enough to save.

It should also explore new financial instruments that could help people from all backgrounds spread and manage their incomes better at different life stages.

This will be new territory for the commission. But the problem is urgent. Without bold reforms, today’s inequalities in work will harden into tomorrow’s inequalities in retirement. Our social contract depends on getting this right.

Sasjkia Otto is a senior researcher at the Fabian Society.