With the second stage of the government’s pensions review due to be published on Monday, former pensions minister and LCP partner Steve Webb has set out three key tests by which he believes the review should be judged.
The next phase of the Department for Work and Pensions (DWP) review focuses on the adequacy of pension savings.
Webb warned that without bold and comprehensive thinking, the review risks missing a once-in-a-generation opportunity to address the UK’s long-term savings shortfall.
Webb’s first test is whether the review has been given a “free hand” to explore meaningful reforms, including those that carry a cost to the Treasury.
He said that increasing pension contributions will inevitably have tax relief implications, and the review must be free to propose measures without being “hamstrung by the Treasury from the start”.
He added that a proper timetable for raising contributions should be part of any meaningful set of proposals.
The second test is whether the review considers the full pensions landscape, including the state pension.
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Webb argued that for many people, especially women, the state pension is a critical component of retirement income, and it would be “incomplete and misleading” for the review to focus solely on private pensions.
The third test calls for a joined-up approach to long-term and short-term savings.
Webb said that increasing pension contributions must be considered alongside the financial realities faced by low-income households, many of whom struggle with short-term savings.
He urged the review to explore integrated solutions, such as “sidecar” savings models that combine pension and emergency cash savings.
He also suggested the review consider the growing number of retirees in rented housing, and whether pension savings could play a role in supporting homeownership.
“This review is a once-in-a-generation chance to tackle the growing crisis of inadequate pension saving in the UK,” Webb said.
“It must not be nobbled by the Treasury from day one but must be free to come up with its own recommendations, even if these cost money.”
He added: “One of the worst outcomes for today’s working-age population would be to end up having to fund rent out of a meagre pension pot.
“This review is a chance to look seriously at that issue.”
