Pensions Commission

Question

Asked by

To ask His Majesty’s Government what recent progress the Pensions Commission has made on its programme of work.

My Lords, last year, the Government revived the Pensions Commission to examine how to improve retirement outcomes for future generations. Its interim report, published on 19 May 2026, sets out key challenges with the current system and priorities for the next phase of work. It highlights that too many people, especially low and middle-income earners, are not saving enough for retirement. The Government look forward to receiving the commission’s final report and recommendations in early 2027.

Perhaps I may first welcome my noble friend the Minister to her rightful place on the Front Bench. I thank her for her Answer. We look forward to the progress of the commission to the agreed timetable, but I have concerns that it is only one leg of a three-part review: there is the commission; there is the Government’s review of the state pension age, which commenced a year ago yesterday and has been little heard of since; and there is the issue of the triple lock and the level of the new state pension. They all need to be resolved together to achieve a sustainable settlement. Can my noble friend explain to the House how these different strands will be brought together?

I can indeed, and I am grateful to my noble friend for his welcome back. He will forgive me, as I will not be able to give him any specific answers on the future rates of the state pension; if I pre-empt the Budget, I think I may be the shortest-living Minister in history—I would not even make it to 24 hours. But I can tell him how the process will work. The Government are required to do a review of the state pension age. We have set up an independent commission, chaired by Dr Suzy Morrissey, to look at the evidence and make a report, which it has now done and handed it in. The Government will take a wider range of evidence, including from the Pensions Commission, and will then have to make a decision about the future of the state pension age. The commission is looking at the adequacy of the state pension. Obviously, the state pension is there, but the key objective is determining whether people are saving enough for retirement—so it is not just about what the state pension is doing but about whether people are saving enough in private pensions for retirement, and it is clear from the interim report that they are not. We now look forward to the recommendations that are coming. All of us will come together and the Government will make a decision. This is all on the back of the significant work done already by the pensions investment commission and the recent Bill on private pension schemes. It is all coming together.

My Lords, I welcome the fact that the Minister is still there on the Front Bench; may it continue. My question is on which comes first. We discussed the then Pension Schemes Bill at length—a very complicated Bill—various other pension things have come before the House; and now we have a commission. Surely, it is putting the cart before the horse by us all doing lots of legislation and then having a commission to see what should be in it. Surely, the commission should have come first.

I now realise that I did a terrible job, because repeatedly during the passage of the Pension Schemes Act I tried to explain why that was not right, and I utterly failed—I will have one last go. The Government set out a pensions investment review to look at the state of the landscape of private pension saving. We then recognised that, if we want people to save more for their retirement in private pensions, we need to make sure that they will get the returns they need. The Pension Schemes Act is now laying the ground to make sure that private pension savers are getting the returns, so that if the Pensions Commission looks at it and decides there needs to be more private pension saving, the people who make those savings will get the return on that hard-earned money. It does all come together. I know the noble Lord was not able to be there, but I did a briefing yesterday, open to all Peers, on what is happening in the pensions area, and we set out a road map showing how all these things come together; I would be very happy to send him a copy of that.

My Lords, in welcoming the Minister back to her seat, with her in-depth knowledge of all these topics, can I ask whether the Pensions Commission will explore how access to the state pension for terminally ill people of working age who are too ill to continue working can be made available? A large number of them have already paid 35 years of contributions but, because they are young, they are not accessing the pension at a time when they desperately need it.

My Lords, I am not pre-empting anything that the commission will say, but the Government are very aware of the position of people who have terminal illnesses. As the noble Baroness of course knows very well, we have looked at some of the rules around how, for example, the benefits system can best assist people. She may be aware, from a Question answered by my noble friend Lord Livermore in which she was very much involved, that the Government have agreed to look at the way in which the tax system more broadly treats that and how we will address it. All those things are being looked at in the round. What the Pensions Commission does is up to it and I wait to hear what it has to say.

My Lords, is the Minister aware that only 17% of the 4.4 million self-employed people in this country are actively saving? Is this of grave concern to her? What are the Government going to do about it?

The noble Lord raises an excellent point. In fact, we have seen a significant drop. In the 1990s, roughly half of people who were self-employed were saving for a pension; it is now under 20%. There are more self-employed people now and there are different kinds of self-employment. However, there is no question that that is a big dip. The Pensions Commission found that, of those whose only income comes from self-employment, only 4% were saving for a pension. One of the key tasks for the Pensions Commission is specifically to look at and recommend to government what to do about all those who are undersaving, including people who are self-employed. I am grateful to the noble Lord for raising that.

My Lords, I too welcome my noble friend back to her rightful position. She talked about people working hard to save for their pensions. They include pensioners who worked at Nissan in the north-east. Many now find themselves in very dire straits, because for those who accumulated in a pension scheme before 1997, the pension trustees and company are no longer increasing it along with inflation, so those pensioners are now finding the value of their pensions diminishing. Is this something that the Government could look at?

I am grateful—I will never be so appreciated ever again, so I am really going to enjoy this session. My noble friend raises an important point. In a sense, it is up to individual schemes what their rules are for indexing their pensions. The minimum legal requirements for indexation have to be appropriate for all DB pension schemes, because they have to strike a balance between what members need and what the employer can afford. In the end, as he will know, the strongest guarantee is a good, strong sponsoring employer. However, there are two things that may help. One is, as he may be aware from the Bill, that the Government have changed the rules to allow a wider range of well-funded schemes to release any surplus that is there, with the agreement of trustees, which could be used to go towards paying for indexation, for example, if affordable and appropriate. At the other end of the scheme, the Government took action in that Bill to look at giving indexation to those who end up in the PPF or FAS for benefits earned before 1997. That will at least help.

My Lords, the Pensions Commission is rightly worried about pension adequacy for a worryingly large and even growing proportion of the population and will of course make its recommendations in due course. But given the urgency of the problem, can the Minister tell us what the Government are doing now to promote greater financial self-sufficiency and reduced welfare dependency in retirement?

Yes. The single best guarantee of a happy retirement is a happy working life where people have the opportunity to earn enough money and to save enough money. We absolutely are doing huge amounts—I will not recite it all here as I have done many times before—and investing in all kinds of programmes to get people into work and to get them to progress in work and to be able to move up the income ladder to be able to save. However, one thing we know is that too many people are not working long enough to save or saving enough when they are in work and, in many cases, even if they put the right amount of saving in, the decisions they make at the point they come to retire—decumulation—can be crucial to how much they get to live on. We have to attack it on all fronts; no one of those alone will do it.

Will the Minister rule out the state pension age ever being 70, despite what the commission and others might say, recognising that the pace of the increase in life expectancy has slowed considerably?

My Lords, the law is clear at the moment. The state pension age is now gradually rising from 66 to 67. That began in April 2026, and it will finish in March 2028. What I can say about the state pension age is that, as legislated by the previous Government, there is a requirement periodically to review it. The third government review of the state pension age was launched on 21 July last year. It has to be completed by the end of March 2029. Clearly, I cannot pre-empt what will come out there. Its job is to consider a wide range of evidence, including evidence on life expectancy, findings from the Government Actuary on the proportion of adult life spent in retirement and the independent report by Dr Suzy Morrissey that I mentioned earlier, as well as other evidence; for example, from the Pensions Commission. The Secretary of State will look at all that evidence and make a decision. For reasons the noble Baroness will know very well as a former Secretary of State having been in that kind of position, he will wait until he has all that evidence and make a decision.