The DWP has issued a worrying update to pensioners about their pension pots.
Liz Kendall says the Pensions Commission will tackle the barriers that stop people from saving (Image: Getty)
The Department for Work and Pensions (DWP) has issued a warning, telling pensioners will be £800 worse off by 2050 – as it orders a review into the State Pension age.
The DWP’s Work and Pensions Secretary Liz Kendall has today launched an official review into the State Pension age following concerns that future pensioners will be poorer than those retiring today unless changes are made. The government says adults are not putting enough into private pensions for their retirement, and that pensioners will be £800 poorer by 2050.
Liz Kendall has launched an early review of the retirement age, which is due every six years, but the previous one was completed only in 2023. She also announced that the government is going to revive the Pensions Commission to explore why future pensioners are set to be so much worse off.
In its report issued today, July 21, the government said about the State Pension age: “The purpose of this Independent Report is to make recommendations on a framework to allow the Secretary of State to consider future State Pension age arrangements in the light of the long-term demographic pressures the country faces.”
DWP analysis suggests 15 million people are undersaving for retirement, with the self-employed, low paid and some ethnic minorities particularly affected.
Around three million self-employed people are said to be saving nothing for their retirement, while only a quarter of people on low pay in the private sector and the same proportion from Pakistani or Bangladeshi backgrounds are saving.
Women face a significant gender pensions gap, with those approaching retirement in line to receive barely half the income that men can expect.
The DWP’s Pensions Commission announcement said: “The Commission of 2006 was a huge success, building a consensus for the roll-out of Automatic Enrolment into pension saving that means 88% of eligible employees are now saving, up from 55% in 2012.
“However, new analysis shows that there is more to do with the incomes of retirees set to fall over the next few decades if nothing changes:
- Retirees in 2050 are on course for £800 or 8% less private pension income than those retiring today
- 4-in-10 or nearly 15 million people are undersaving for retirement.
“New analysis today also reveals a stark a 48% gender pensions gap in private pension wealth between women and men. A typical woman currently approaching retirement can expect a private pension income worth over £5,000 less than that of a typical man (just over £100 per week for a woman compared to just over £200 a week for a man).”
The government said relaunching the Commission will assess the barriers stopping people from saving enough for their retirement, with its final report due in 2027.
Pensions minister Torsten Bell added: “The original Pensions Commission helped get pension saving up and pensioner poverty down. But if we carry on as we are, tomorrow’s retirees risk being poorer than today’s. So we are reviving the Pensions Commission to finish the job and give today’s workers secure retirements to look forward to.”
