A former pensions minister is urging the Labour Government to launch a "once-in-a-generation" review of the state pension and wider retirement system next week.
On Monday (July 21), ministers will unveil the second stage of Labour's Pensions Review, which will reportedly focus on the adequacy of retirement savings across the UK.
Ahead of tomorrow's announcement, pensions minister Steve Webb has established three critical tests to judge the effectiveness of the upcoming announcement.
His framework aims to ensure the review addresses the full scope of Britain's pension savings crisis. Retirement specialists are also pressing for stronger auto-enrolment enforcement measures.
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Webb's first tests examine whether the review has been given a "free hand" to recommend reforms, even those requiring Government expenditure.
Specifically, the LCP partner questions if Treasury constraints might hamstring the process from the outset.
His second test asks whether the review will assess the entire pension system rather than focusing solely on private pensions.
Furthermore, Webb emphasises that state pensions form a substantial portion of retirement income, particularly for women.
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The third test concerns whether the review will adopt an integrated approach to both long-term and short-term saving.
As such, Webb suggests examining innovative solutions like 'sidecar' cash savings incorporated into pension systems.
The former pensions minister stressed that most system changes, including encouraging increased savings, would require Government funding through mechanisms such as enhanced tax relief.
He argued that a proper review must be permitted to consider all options and establish a realistic timeline for improving contributions.
"This review is a once-in-a-generation chance to tackle the growing crisis of inadequate pension saving in the UK," Webb said.
He warned that with a million more pensioners expected to rent accommodation over the next two decades, the review should consider allowing pension savings to help build house deposits.
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Webb cautioned that "one of the worst outcomes for today's working age population would be to end up having to fund a rent out of a meagre pension pot."
Retirement specialists have emphasised that raising auto-enrolment levels alone will not solve the pension crisis. Lily Megson-Harvey, Policy Director at My Pension Expert, noted that "over 90 per cent of consumers don't currently access pensions advice, with many lacking financial security when they reach the end of their career."
She warned that without addressing this engagement gap, any government review would fail to achieve its intended results.
"We need to see a step change from Government in how it helps people understand and engage with their pension options, so their money works harder for them," Megson-Harvey said.