The second phase of the UK’s landmark pensions review has been reportedly delayed, with the Department for Work and Pensions (DWP) saying more details will be set out in “due course”.
The UK pensions review, promised by the Labour party as part of its manifesto prior to the UK’s general election in early July, was announced a couple of weeks later in the King’s Speech.
When launching the first phase of the review in August, which focused on investment, the government said the second phase would start later this year, and that it would consider further steps to improve pension outcomes, including assessing retirement adequacy.
The government published the interim report on the first phase at the Mansion House financial statement event on 14 November and was expected to publish the final report in the spring, before plans for the second phase of the review were frozen.
A spokesperson for DWP said: “Creating wealth and driving growth is at the heart of our Plan for Change. We are determined to ensure that tomorrow’s pensioners are supported, which is why the government announced the landmark two-stage Pensions Review days after coming into office and why the Pension Schemes Bill was in the King’s Speech.”
David Fairs, partner at LCP, said that with the state pension age review due to commence no later than July 2026, there was a “very tight” window for the second stage pension review to take place.
“The scope of the second stage review was always going to be large and incorporate both the 2017 recommendations on [automatic enrolment] and also a wider review on adequacy,” he said.
Fairs added there is “quite a lot to get through over 2025”, noting that this delay “might well mean substantial”.
Steve Webb, also a partner at LCP, believes that with the Autumn Budget adding £25bn to employer National Insurance Contribution, the appetite for government to ask employers to do more on auto-enrolment is “pretty limited”.
He added that a “slow track” for a review of ‘adequacy’ and any subsequent legislation is not a “surprise, if rather depressing”.
Jon Dean, head of retirement strategy at Altus Consulting, agreed that having increased businesses’ costs in October’s budget, the government “clearly senses a political minefield ahead should it further add to payroll costs through additional pension contributions”.
He said: “The origins of this latest row-back of the adequacy of pension savings can be traced directly back to the last government’s two consecutive unfunded cuts to employee national insurance. In fighting the last election, Labour backed itself into a corner with promises not to increase taxes on working people, and in increasing the NI [national insurance] burden on employers, it looks like it could be another parliament before we see any action to improve future workplace pension contribution rates.”
Jamie Fiveash, chief executive officer of Smart Pension, also expressed disappointment over the delay of the pensions review.
He said: “When this new Labour government came to power, it promised to fix the foundations of the country. There is no more foundational issue than our pensions timebomb. With nearly a third of savers set to fall below the minimum retirement living standard, delaying this review risks compounding an already pressing problem. Savers deserve clear leadership, decisive action and a plan to protect their futures.
“We call on the chancellor to prioritise the second phase of the review in the new year.”
Calum Cooper, head of pensions policy innovation at Hymans Robertson, said that a “prolonged, open-ended delay will be ‘damaging’ for industry confidence in the ability for real change to take place”. More importantly, he pointed out, it defers better retirement prospects for millions of people.
He said that given the lack of timescale provided, this delay could add “months and years” to the formation and implementation of decisions.
“The positive effect of those changes would be measured in generations, so it is vital that it happens. The potential positive impact of the delay will be felt by businesses and employers in the short term. This is an important consideration to factor into the timing of the review, as should be the cost-of-living challenge facing people today,” Cooper noted.
He pointed out that the government is concerned about the impact of the review on business, but he said that it could “start tomorrow with any impact delayed until a future date”.
He urged the government, if it must delay, to take it as an opportunity to design an independent pensions commission to work with industry, and across the political spectrum.
“This will give the confidence and conviction to commit to adequacy. Meaningful change, that will last beyond a generation, would benefit from such an approach to give confidence in decisions, help make tough choices and ensure promises are delivered. This will give the best chance of leaving behind better jobs and a UK pensions system to be proud of from the Labour government,” Cooper said.
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