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| LIZ KENDALL |
Britain could face a "tsunami of pensioner poverty" in the coming decades unless the retirement savings system is reformed, according to Work and Pensions Secretary Liz Kendall.
Speaking at the launch of a new independent pensions commission, Kendall warned that more and more people may struggle to make ends meet in old age. She said that unless action is taken, future pensioners will be worse off than today’s – mainly because people either aren’t saving enough, or not saving at all.
“Almost half of working-age adults aren’t saving anything for their retirement,” Kendall explained. “And many who are, aren’t saving enough.”
The new commission takes a similar approach to the one introduced by Tony Blair’s government in 2002. Back then, the Adair Turner-led review led to the auto-enrolment system, which encouraged millions of workers to start saving through their employers.
The new panel will be led by Jeannie Drake, a member of the original Turner team. She will be joined by Sir Ian Cheshire, former chair of Barclays UK, and economist Nick Pearce.
The commission aims to build political and social consensus by consulting with business and worker groups like the Confederation of British Industry (CBI) and the Trades Union Congress (TUC). Kendall said she hoped the proposals would get cross-party support.
Some of the ideas on the table include lowering the auto-enrolment age from 22 and increasing the current minimum contribution rate of 8%. Another proposal being explored is the “sidecar savings” model, supported by the Resolution Foundation, where a portion of pension savings could be accessed for emergencies, like a rainy-day fund.
Kendall also confirmed the start of the next scheduled review of the state pension age, which is currently 66 and due to rise to 67 between 2026 and 2028.
However, the commission will not look at the triple lock – the guarantee that state pensions rise by the highest of inflation, wage growth, or 2.5%. Despite its high cost, Kendall said it is “out of scope” for this review.
The Office for Budget Responsibility has warned about the increasing cost of the triple lock, which has put pressure on government spending.
Kendall also highlighted the impact of housing costs on pensioner poverty. “Young people today are struggling to get on the housing ladder,” she said. “High rent and housing costs in retirement are pushing more older people into poverty.”
While housing policy is not part of the commission’s work, Kendall mentioned Labour’s plans to boost housebuilding as part of the broader effort to ease the crisis.
Torsten Bell, a former chair of the Resolution Foundation and now pensions minister, was also at the launch. When asked about changing pension tax relief – which currently benefits higher earners most – Bell said tax changes are not part of the review, though he acknowledged the system costs around £70 billion a year.
Business leaders cautiously welcomed the commission but warned about the risks of increasing employer costs. Kate Nicholls, chair of UK Hospitality, said rising expenses like national insurance have already impacted jobs. She stressed the need for a partnership approach with businesses to find the right balance.
In her speech, Kendall also touched on the government’s broader welfare reform plans. Referring to Labour’s recent reversal on disability benefits cuts, she admitted the path of reform is never easy but said it is necessary.
“Reforming the welfare state is always challenging and often controversial,” she said. “But it’s something we must not shy away from.”
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