I have done what I can to digest the SPP’s response. It is 11,000 words long and I doubt many but me and Richard Smith outside the holy circle of the SPP and Pension UK policy makers will have read this document. I will reserve my comments. Here is Richard Smith’s response to the SPP’s response which is itself Pensions Commission 3
Here is the 11,000 word response; it has an executive summary. It has a section on CDC near the end.
The Society of Pension Professionals (SPP) response
to the Second Pension Commission’s Interim Report
1. Introduction
1.1. The SPP strongly supports the Commission’s conclusion that the UK pensions system has solid foundations
but is not currently on track to deliver adequate retirement outcomes for all.
1.2. In particular, we believe that:
• pension adequacy remains the central challenge facing the system, particularly when account is taken of
housing costs, care needs and questions around the long–term sustainability of the State Pension settlement;
• despite the success of Automatic Enrolment (AE), significant participation gaps remain and pension
outcomes continue to vary considerably across different groups;
• retirement outcomes are determined not only by how much people save and investment performance but
also by how they access and use those savings, making decumulation a critical component of adequacy.
1.3. This response to the request for views therefore focuses on practical and deliverable measures that can
improve retirement outcomes across the pensions journey, from saving through to retirement income.
1.4. In developing our recommendations, we have sought to balance adequacy, fairness and sustainability,
recognising that all pension policy involves trade–offs between government, employers and individuals.
1.5. We have focused on proposals that are realistic, capable of implementation within the UK system and
designed to support long–term confidence in pension saving.
1.6. Guiding principles
1.7. Our recommendations are informed by the following principles:
– policy changes should be phased and predictable, allowing sufficient time for adaptation;
– reforms should minimise cliff edges and unintended consequences for savers and employers;
– policy should support earlier, more consistent saving, maximising the benefits of long–term investment;
– pension outcomes should be fair across different generations, working patterns and life circumstances;
– action should not be unnecessarily delayed, as postponing reform increases the scale of future
challenges;
– there should be broad political consensus on adequacy so that a clear long–term roadmap for pension
reform is possible;
1.8. We also believe that effective pensions policy requires ongoing stewardship, a recognition of the links
between pensions and wider economic and social policy, and a strong focus on practical delivery.
1.9. Focus of this response
1.10. Within this framework, our response concentrates on five areas where we believe further development is
needed:
– Establishing clearer and more practical measures of retirement adequacy.
– Creating a credible pathway to higher levels of pension saving.
– Extending pension participation to groups not well served by the current system.
– Improving retirement outcomes through better decumulation solutions.
– Strengthening financial education, engagement and trust in pensions.
2. Executive summary
2.1. Pension adequacy measures should be at the heart of future pensions policy.
The SPP supports the development of clear and agreed measures of retirement adequacy to guide
policymaking, help individuals understand their retirement position and provide a framework for assessing
future reforms.
2.2. A three–pillar approach to measuring adequacy would better reflect the structure of the UK pensions
system.
The State Pension should be measured against a cash–based minimum income standard, AE against
replacement rate targets that include State Pension income, and voluntary saving against additional
aspirational income targets.
2.3. Adequacy measures should reflect differing circumstances.
Housing tenure and household composition have a significant impact on retirement income needs and should
be recognised within any adequacy framework.
2.4. Financial education and improved communications are essential to improving retirement outcomes.
The SPP supports a long–term programme of financial education beginning in schools and continuing
throughout working life, supported by employers, government and the pensions industry.
2.5. The self–employed require an AE equivalent.
Voluntary pension saving has not delivered adequate outcomes for many self–employed individuals and
options for AE through the tax system should be explored, supported by suitable default pension
arrangements.
2.6. Targeted action is needed to address pension participation gaps.
Reforms to AE, improved communications and greater flexibility in retirement saving arrangements could help
improve outcomes for women, ethnic minority groups, disabled people and carers.
2.7. AE remains the most effective tool for improving pension adequacy.
The SPP supports extending pension saving opportunities to groups currently excluded from workplace
pension provision, including younger workers and those working beyond State Pension Age.
2.8. Stronger retirement income defaults are needed.
Guided retirement solutions, pension consolidation, dashboards and measures that improve financial
resilience can help individuals achieve better retirement outcomes.
2.9. CDC schemes have an important role to play in both accumulation and decumulation.
The SPP supports the continued expansion of CDC provision, including multi–employer, retirement–only and
retail market arrangements.
2.10. Access to financial guidance and advice should be improved.
The SPP supports reforms that make it easier and more affordable for individuals to access support when
making retirement saving and decumulation decisions.
2.11. Pension adequacy measures should be subject to regular review.
A statutory five–yearly review would help ensure pension policy remains responsive to changing economic
and demographic circumstances.
Measuring Retirement Outcomes
3.1. Clear, agreed measures of pension adequacy are essential, not only as a starting point for pension policy, but
also so that individuals can really understand their own position.
3.2. Although the first Pension Commission’s replacement rates were based on a three–pillar pension system, this
was a single blended rate varying only by pre–retirement incomes. The SPP therefore agrees that a hybrid
adequacy measure would better reflect the needs of different earners and help anchor future public policy in
this area. However, we would go slightly further and apply different pension adequacy measures to each
pension system pillar.
3.3. The original band one earnings level, uprated to around £15,900 in 2023 terms, was associated under the
first Pension Commission with an 80% target replacement rate, of which 80% would be achieved through
public policy. For an individual on exactly £15,900 this would result in a retirement income of £10,176
(£15,900 x 80% x 80%) which is close to the 2023/24 State Pension of £203.85 a week or circa £10,600 a
year.
3.4. This highlights a limitation of the replacement rate framework at lower earnings levels. In practice, adequacy
here is driven less by a proportion of earnings and more by a minimum income floor, which the State Pension
broadly approximates. The use of a high replacement rate therefore risks appearing circular: the target is
effectively anchored to a socially acceptable minimum income, with the replacement rate used to express that
outcome rather than determine it. Given that no one would expect someone on half the earnings to only need
£5,088 (half of the £10,176 referenced above), the use of a target replacement rate for low earners appears
to be somewhat artificial with the methodology derived from the desired answer rather than vice versa.
3.5. To address this, the first pillar, State Pension supported by means tested housing benefit, should therefore be
an absolute cash amount designed to provide a basic adequacy standard for lower earners. This could be
considered to be the minimum amount required to avoid poverty, purely subsistence or the minimum
retirement living standard as being an amount which ‘covers all your needs, with some left over for fun.’1
Whichever level is chosen, this is an amount which is likely to be the same for both pre and post–retirement.
To help with public understanding, it should be clear that this state benefit should be part of individual
pension planning. It may not be the amount which people would aspire to, but it can be considered as either a
firm foundation or a safety net.
3.6. The second pillar, AE, is far more suited to a target replacement rate, provided this includes pension income
provided by the first pillar. For example, using the revalued top of band two earnings of around £29,000 and a
70% replacement rate would give a target pension income of £20,300 of which approximately half would
come from State Pension (in 2023/204 terms) and half from AE. This overlap with the first pillar is crucial as it
is both clearer what AE needs to deliver and it also includes State Pension, framing it as far more achievable.
3.7. For those in higher earning bands, the proportion of retirement income delivered through public policy
declines materially. Using a 50% target replacement rate for an individual earning £67,000 implies a target
retirement income of around £33,500. Of this, the State Pension would contribute only c£10,600 (in 2023/4
terms), with minimum auto–enrolment (AE) provision delivering a relatively modest additional amount. The
majority of the target income would therefore need to be met through saving above minimum AE levels.
3.8. This reflects a core feature of the Pensions Commission framework: as earnings rise, the system shifts from
being state led to increasingly reliant on private provision. This effect is reinforced by the design of AE itself,
where contributions are only required on earnings between the lower and upper qualifying earnings
thresholds. Once earnings exceed the upper earnings limit, no further mandatory contributions are made,
limiting the absolute level of income that AE can deliver. As a result, public policy provides not a fixed share
of retirement income, but a diminishing one, with outcomes for higher earners increasingly dependent on
additional voluntary saving. In summary, for those in higher earning bands there will be an ever–reducing
proportion of retirement income derived from AE.
1 Retirement Living Standards, Pensions UK, June 2026:
https://www.retirementlivingstandards.org.uk/
3.9. While the SPP would not support a means tested State Pension, it is also clear that there may naturally be an
upper limit to the amount of pension which can be incentivised by public policy. These second pillar target
replacement rates may therefore be capped, for example by a specified absolute cash income amount per
annum.
3.10. The third pillar of voluntary saving is then expressed as an absolute cash income amount per annum in the
same way as for the first pillar. This third pillar not only includes additional employer and employee pension
savings and private pensions, but also non–pension savings and other potential sources of post–retirement
income or wealth. This third pillar is not specifically designed to support government pension policy. Instead,
it is there to express more clearly the amount of retirement income to which an individual may aspire.
3.11. For individuals who aspire to outcomes beyond those delivered by public policy and minimum AE, this third
pillar provides a clear framework for setting more personalised targets. Benchmarks such as the Retirement
Living Standards may offer a useful guide. For example, a single person targeting a “comfortable” retirement
would be aiming for an income well in excess of that provided by the State Pension and minimum AE,
highlighting the need for additional contributions and broader wealth accumulation. Combined with financial
education and improved engagement, this creates an opportunity for individuals to move beyond default–
based outcomes and instead anchor their saving to a clearly defined retirement income goal aligned to their
own aspirations.
3.12. As stated above, the first Pension Commission noted that it is hard to choose a single default level of pension
savings which suits both homeowners and renters. Measures of pension adequacy should therefore
recognise these two factors.
3.13. These proposed measures of pension adequacy do not have the simplicity of the first Pension Commission’s
banded replacement rates, however for individuals they are potentially easier to use.
3.14. An individual is likely to just use the figures that they consider to be most appropriate for their relationship and
housing status, rather than every possible specific circumstance. There should be a number of levers to
encourage employers to contribute more. For example, there could be a greater acknowledgement of
employers who are able to make 12% or higher contribution rates. For example, via a nationally recognised,
uniform kite mark/accreditation programme If both target replacement rates and cash amounts are used to
express future retirement income, then individuals can focus on which of the two figures works best for them.
The pillar two percentage replacement rates act as a guide while making it clearer that the lower paid you
are, the greater the proportion which will be State Pension.
3.15. When using these pension adequacy figures to determine pension policy it is also important that they
accurately reflect existing complexity rather than being an oversimplification. Even if it becomes apparent that
it is not possible to have a pension policy which achieves pension adequacy in all situations, making this
explicit would at least provide some mitigation.
3.16. While differing career lengths will be a factor in achieving pension adequacy, the SPP does not consider that
this should be a factor when considering how pension adequacy is measured. The same applies for others
who miss out on pension savings and the impact that has on them achieving pension adequacy.
3.17. The SPP has not expressed a view on the income amount which should be provided by pillar one, the
replacement rates in pillar two or the upper amount of state supported pension income. Nor have we
commented on how state support for pensions should be targeted. Our October 2024 paper Pensions tax
relief: separating fact from fiction2 does set out SPP views on some of the options which might be considered.
3.18. These issues will always be for the government of the day to decide, based on both financial and political
considerations but irrespective of government, clearly expressed adequacy measures should be at the heart
of pension policy. Once published, these measures could be used to assess any future changes to pension
policy even if they are no longer explicitly referenced by a subsequent government. A statutory quinquennial
review of these measures and progress towards achieving pension adequacy will help allow pension policy to
adjust to future uncertainties as they arise.
upper limit to the amount of pension which can be incentivised by public policy. These second pillar target
replacement rates may therefore be capped, for example by a specified absolute cash income amount per
annum.
3.10. The third pillar of voluntary saving is then expressed as an absolute cash income amount per annum in the
same way as for the first pillar. This third pillar not only includes additional employer and employee pension
savings and private pensions, but also non–pension savings and other potential sources of post–retirement
income or wealth. This third pillar is not specifically designed to support government pension policy. Instead,
it is there to express more clearly the amount of retirement income to which an individual may aspire.
3.11. For individuals who aspire to outcomes beyond those delivered by public policy and minimum AE, this third
pillar provides a clear framework for setting more personalised targets. Benchmarks such as the Retirement
Living Standards may offer a useful guide. For example, a single person targeting a “comfortable” retirement
would be aiming for an income well in excess of that provided by the State Pension and minimum AE,
highlighting the need for additional contributions and broader wealth accumulation. Combined with financial
education and improved engagement, this creates an opportunity for individuals to move beyond default–
based outcomes and instead anchor their saving to a clearly defined retirement income goal aligned to their
own aspirations.
3.12. As stated above, the first Pension Commission noted that it is hard to choose a single default level of pension
savings which suits both homeowners and renters. Measures of pension adequacy should therefore
recognise these two factors.
3.13. These proposed measures of pension adequacy do not have the simplicity of the first Pension Commission’s
banded replacement rates, however for individuals they are potentially easier to use.
3.14. An individual is likely to just use the figures that they consider to be most appropriate for their relationship and
housing status, rather than every possible specific circumstance. There should be a number of levers to
encourage employers to contribute more. For example, there could be a greater acknowledgement of
employers who are able to make 12% or higher contribution rates. For example, via a nationally recognised,
uniform kite mark/accreditation programme If both target replacement rates and cash amounts are used to
express future retirement income, then individuals can focus on which of the two figures works best for them.
The pillar two percentage replacement rates act as a guide while making it clearer that the lower paid you
are, the greater the proportion which will be State Pension.
3.15. When using these pension adequacy figures to determine pension policy it is also important that they
accurately reflect existing complexity rather than being an oversimplification. Even if it becomes apparent that
it is not possible to have a pension policy which achieves pension adequacy in all situations, making this
explicit would at least provide some mitigation.
3.16. While differing career lengths will be a factor in achieving pension adequacy, the SPP does not consider that
this should be a factor when considering how pension adequacy is measured. The same applies for others
who miss out on pension savings and the impact that has on them achieving pension adequacy.
3.17. The SPP has not expressed a view on the income amount which should be provided by pillar one, the
replacement rates in pillar two or the upper amount of state supported pension income. Nor have we
commented on how state support for pensions should be targeted. Our October 2024 paper Pensions tax
relief: separating fact from fiction2 does set out SPP views on some of the options which might be considered.
3.18. These issues will always be for the government of the day to decide, based on both financial and political
considerations but irrespective of government, clearly expressed adequacy measures should be at the heart
of pension policy. Once published, these measures could be used to assess any future changes to pension
policy even if they are no longer explicitly referenced by a subsequent government. A statutory quinquennial
review of these measures and progress towards achieving pension adequacy will help allow pension policy to
adjust to future uncertainties as they arise.
2 Tax Relief: Separating fact from fiction, The Society of Pension Professionals, October 2024:
https://the–spp.co.uk/wp–content/uploads/SPP–Pensions–Tax–Relief–report–8–October–2024.pdf
Accumulation and adequacy: the depth and growth of private pension saving
3.19. The SPP agrees with the Commission (at 3.2) that the UK pension system depends strongly on its ‘second
pillar’ of workplace savings to deliver incomes in retirement and share the Commission’s thinking (at 3.4) that
current minimum contribution rates may not be sufficient to ensure adequate outcomes for large parts of the
current working population. The overall level of savings needs to increase.
3.20. That said, higher contribution rates alone will not guarantee adequate retirement outcomes and should form
part of a broader strategy encompassing investment performance, engagement, financial resilience and
retirement income decision–making.
3.21. We also concur with the Commission’s view (at 3.6) that the way forward needs to command a broad
consensus, where that is achievable, and be both sustainable and durable. There has been considerable
delay in policy making for pension saving over the past decade – the 2017 AE Review which outlined two
landmark extensions to workplace pensions for which the core legislative expansions have still not yet been
enforced. This suggests considerable political challenges in taking the necessary measures to achieve
adequate outcomes.
3.22. In summary, it appears that many individuals and employers (and the Government) are reluctant to voluntarily
make the necessary sacrifices to achieve adequate outcomes. There is continual pressure on any realistic
proposal to increase the contribution rate (even in quite marginal ways) since individuals worry about the cost
of living, employers are concerned about their financial situation, and the Treasury are focussed on
immediate funding given a difficult fiscal environment. Together these approaches (and the lobbying
engendered) lead to inadequate outcomes. The Commission’s stark report is a useful starting point in setting
out the path that the UK is on.
3.23. There is an interaction between the first and second pillars of the UK pensions system. We agree that the
foundational role for the State Pension has been met for the time being, but we note that the cost of that
foundation is set to grow with the changing old age dependency and so we cannot be sanguine about any
assumption that it be able to continue to be as generous as it currently is. That stated we wish to underline
that the State Pension is an essential part of the social contract. Those who have funded the State Pension
through the payment of taxation and National Insurance contributions over the decades should not face any
means testing of their right to a first pillar pension on the grounds that they have accrued a good second pillar
pension. Otherwise, the incentive to contribute to the second pillar pension will be seriously undermined.
3.24. To those who question why the State should not seek to fund the State Pension from those with a higher
pension income, the simple answer is that it does already through the application of income tax on pensions
in payment.
3.25. We agree with the Commission’s observation (at 3.16) that the key to success for AE is its relative simplicity.
We believe that further steps should aim to be straightforward and relatively easy to communicate. They
should also operate in a way that small businesses can manage without having to invest in expensive
systems or advisers. They should also build on the existing structure rather than trying to complicate it or
replace it.
3.26. Here the most obvious gain for simplicity would be in broadening the age bands. First, the 2017 Review
recommended lowering the minimum age for AE from 22 to 18 and this is long overdue. Legislation already
exists to facilitate such a step. We would urge the Commission to consider whether, for the purposes of
simplicity, it might not be better to remove any age limits on AE for those whose earnings from employment
are sufficient to justify enrolment. For the young the effects of compound interest can only facilitate a better
retirement income, while for the old who are under pensioned the small extra will also help.
3.27. We would also suggest that a ‘permissive’ approach to some of the current regime’s features on earnings
would allow those employers who wish to be generous. For example, the legislation in section 4(1)(c) on the
minimum earnings trigger could be expressed so that it would be the amount set by Government legislation
“or such lower amount (including nil) as the employer may specify in writing to workers”.
3.28. We agree that AE has not got people saving enough (as outlined in 3.32 to 3.47) and we seriously doubt that
voluntary saving is likely to make up the difference for the great majority who do not have higher levels of
earnings. We see the unfortunate belief that the AE levels of saving are “correct” as a significant contributor
to this issue. In our judgement it is essential to move thinking away from such a conclusion and so
recommend that a major initiative is launched to position more appropriate levels of savings as “correct.”
3.29. The public’s mind will need to be changed on this point, so that the labour market works to facilitate the policy
objective. For this reason and because a voluntary approach has been shown to be ineffective, we believe
that this reform should also be linked to a plan to raise the level of pension savings towards at least the lower
and middle echelons of those illustrated savings.
voluntary saving is likely to make up the difference for the great majority who do not have higher levels of
earnings. We see the unfortunate belief that the AE levels of saving are “correct” as a significant contributor
to this issue. In our judgement it is essential to move thinking away from such a conclusion and so
recommend that a major initiative is launched to position more appropriate levels of savings as “correct.”
3.29. The public’s mind will need to be changed on this point, so that the labour market works to facilitate the policy
objective. For this reason and because a voluntary approach has been shown to be ineffective, we believe
that this reform should also be linked to a plan to raise the level of pension savings towards at least the lower
and middle echelons of those illustrated savings.
A possible solution
3.30. One means of raising public awareness and confidence in their retirement savings being sufficient, might
come in the form of our 2025 “Saving Retirement” paper recommendation that, “There should be a number of
levers to encourage employers to contribute more. For example, there could be a greater acknowledgement
of employers who are able to make 12% or higher contribution rates. For example, via a nationally
recognised, uniform kite mark/accreditation programme.”
3.31. Building on this idea, the designation of Bronze, Silver, and Gold to grade the levels of saving could be
introduced. Importantly the Bronze level would be a significant improvement on the current ‘Basic’ level. This
should raise public awareness in a practical way.
3.32. In our view, a Bronze level of saving would be set at least 50% higher total contribution rates than the
minimum level – so 12% of pensionable earnings (with qualifying earnings being the minimum level of
pensionable earnings). There are a variety of views of how this 12% total should be split between employees
and employers. However, if this is phased in (as suggested below) one view is that a member contribution of
5% is broadly enough without triggering excess opt–out elections, so that the employer contribution would
migrate to 7% of pensionable salary but a popular alternative view is a 6% / 6% equal split.
3.33. A Silver level of pension saving of 15% pensionable earnings, perhaps with the with the employer
contribution being 9% and the member contribution being 6%, or 10% employer, 5% employee but certainly
not equal levels of member and employer contributions at this level.
3.34. It should not be policy to impose a Gold level of saving but rather an aspirational target level that good
employers will want to provide where they can and the public understanding of the level could be an influence
on the labour market. It would be entirely voluntary. The aim would be to change people’s psychology and
expectations. Pension saving at 20% of pensionable earnings could qualify for a Gold level and suggest that
employee member contribution would not be more than 7% of this total, it could be as little as 5%. The rest
would be with the employer to fund if it voluntarily chooses this level of pension provision.
3.35. The above levels are designed with DC schemes in mind but equivalent levels for cash balance, DB and
hybrid rights could be specified within the certification regime.
3.36. The next question is how to get there. We recognise the serious challenges employers face at the present
time and the problem that any ‘cost shock’ could constitute, whilst also acknowledging the pensions minister’s
recent observation that employers are now contributing materially less to their employees pensions than
under the previous DB pensions regime. We are also naturally aware of the consequences of delay – millions
more workers having an insufficient retirement income – and the political pressure to delay matters where
cost issues arise. Accordingly, we recommend that certain steps start as soon as practicable but that the
main cost elements only come in progressively. The interval is a great opportunity for public education.
come in the form of our 2025 “Saving Retirement” paper recommendation that, “There should be a number of
levers to encourage employers to contribute more. For example, there could be a greater acknowledgement
of employers who are able to make 12% or higher contribution rates. For example, via a nationally
recognised, uniform kite mark/accreditation programme.”
3.31. Building on this idea, the designation of Bronze, Silver, and Gold to grade the levels of saving could be
introduced. Importantly the Bronze level would be a significant improvement on the current ‘Basic’ level. This
should raise public awareness in a practical way.
3.32. In our view, a Bronze level of saving would be set at least 50% higher total contribution rates than the
minimum level – so 12% of pensionable earnings (with qualifying earnings being the minimum level of
pensionable earnings). There are a variety of views of how this 12% total should be split between employees
and employers. However, if this is phased in (as suggested below) one view is that a member contribution of
5% is broadly enough without triggering excess opt–out elections, so that the employer contribution would
migrate to 7% of pensionable salary but a popular alternative view is a 6% / 6% equal split.
3.33. A Silver level of pension saving of 15% pensionable earnings, perhaps with the with the employer
contribution being 9% and the member contribution being 6%, or 10% employer, 5% employee but certainly
not equal levels of member and employer contributions at this level.
3.34. It should not be policy to impose a Gold level of saving but rather an aspirational target level that good
employers will want to provide where they can and the public understanding of the level could be an influence
on the labour market. It would be entirely voluntary. The aim would be to change people’s psychology and
expectations. Pension saving at 20% of pensionable earnings could qualify for a Gold level and suggest that
employee member contribution would not be more than 7% of this total, it could be as little as 5%. The rest
would be with the employer to fund if it voluntarily chooses this level of pension provision.
3.35. The above levels are designed with DC schemes in mind but equivalent levels for cash balance, DB and
hybrid rights could be specified within the certification regime.
3.36. The next question is how to get there. We recognise the serious challenges employers face at the present
time and the problem that any ‘cost shock’ could constitute, whilst also acknowledging the pensions minister’s
recent observation that employers are now contributing materially less to their employees pensions than
under the previous DB pensions regime. We are also naturally aware of the consequences of delay – millions
more workers having an insufficient retirement income – and the political pressure to delay matters where
cost issues arise. Accordingly, we recommend that certain steps start as soon as practicable but that the
main cost elements only come in progressively. The interval is a great opportunity for public education.
Qualifying earnings
3.37. The qualifying earnings upper band level appears to be no longer appropriate due to inflation. This is
particularly relevant for Generation X who are in the senior part of their career and will tend to be earning
more. We suggest that it should be set at 100 x the hourly NLW for weekly–paid staff (so £1,271 a week) with
£66,092 being the annual equivalent. Adjustments would follow automatically and the need for an annual
order would be avoided, since these matters should not be political. It would also make pension saving much
more predictable for employers.
3.38. We reiterate that these steps are necessary for the reasons pointed out at 3.39 – additional voluntary saving
is not materialising outside the class of high earners.
3.39. We do recognise that contributions are not the only means to improve pot size given the contribution of
investment growth. However, such growth operates most powerfully for the young who have time for it to
work its magic. For older employees in the workforce contributions are particularly important. We also note
that higher contributions for a given arrangement may be more cost effective since a contribution rate of twice
the legal minimum will mean that the fixed costs can be spread over twice the asset base for those that
charge on this basis.
investment growth. However, such growth operates most powerfully for the young who have time for it to
work its magic. For older employees in the workforce contributions are particularly important. We also note
that higher contributions for a given arrangement may be more cost effective since a contribution rate of twice
the legal minimum will mean that the fixed costs can be spread over twice the asset base for those that
charge on this basis.
Investment Growth
3.40. On investment growth we must again emphasise the importance of starting to save early and this suggests
lowering the minimum age for AE (as argued earlier).
3.41. Here we note the comments about charges, value for money, and the alleged advantages of scale. As
contribution rates increase, the importance of how those contributions are invested and the outcomes they
generate becomes even more significant. So there may be a case for the Commission to give further
attention to how the regulatory framework can support better long–term investment outcomes. For example:
– Value for Money (VfM) frameworks should move beyond a narrow focus on cost to incorporate net
returns, risk–adjusted performance, sustainability of income, and overall member outcomes (see the
SPP’s recent paper “Helping Savers Choose: VfM in action”3);
– Regulatory approaches should support investment strategies that are designed for long–term value
creation, including appropriate exposure to a broader range of assets;
– There should be continued focus on ensuring that scale and governance improvements translate into
tangible improvements in member outcomes, rather than simply lower headline charges.
3.42. Furthermore, the £2,880 limit (on which pension tax relief is payable for non–taxpayers) has not increased for
more than a quarter of a century. Increasing this might better encourage parents and grandparents to
consider saving into a pension for the under 18s who are likely to be the greatest beneficiaries of investment
growth.
3.43. The SPP hopes that pension dashboards do materially change the perception of pensions for many people.
However, the expected revelation of the potentially stark shortfall in incomes in retirement may just as likely
be a cause for complaint politically as it may be a cause of action in terms of pension saving.
Other Determinants of Retirement Outcomes
3.44. While the SPP has long argued that the UK needs a clear long–term framework and timetable for increasing
AE contribution rates, we do not believe that contribution levels alone determine retirement outcomes.
3.45. The adequacy debate understandably focuses on contribution rates because they are visible, measurable
and capable of direct policy intervention. However, industry experience suggests that retirement outcomes
are also materially affected by a range of other factors, including investment decisions, periods of
disengagement, consolidation behaviour and decumulation choices. There is therefore a risk that public
policy concentrates disproportionately on the most visible determinant of outcomes rather than addressing
the wider set of factors that influence retirement income. This was a central theme of the SPP’s recent
“Saving Retirement” paper, which identified a range of policy interventions extending beyond increases in AE
contribution rates4.
3.46. The Commission’s analysis necessarily relies on measures of adequacy that aggregate outcomes across
large populations. While such measures are valuable for identifying broad trends, retirement objectives are
often highly individual. Members rarely think in terms of replacement rates or adequacy thresholds; instead,
they assess retirement preparedness against their own circumstances, expectations and financial priorities.
Improving retirement outcomes may therefore require not only higher levels of saving but also greater support
to help individuals understand and plan for their retirement objectives.
3 Helping Savers Choose: VfM in action, June 2026:
https://the–spp.co.uk/document/spp–paper–helping–pension–savers–choose–value–for–money–in–action/
4 Saving retirement: Who is at risk and why? The Society of Pension Professionals, August 2025:
https://the–spp.co.uk/wp–content/uploads/SPP–Saving–Retirement–21.8.25.pdf
3.47. The Commission rightly highlights the competing demands that many households face. Pension saving
decisions often sit alongside housing costs, debt repayment and the need to build short–term financial
resilience. This reinforces the case for policies that complement pension saving rather than compete with
these objectives. Measures such as sidecar savings arrangements, improved payroll savings mechanisms
and other approaches that strengthen financial resilience may ultimately support higher levels of long–term
pension saving by reducing the likelihood that individuals opt out of pension saving when faced with financial
pressures. Nest Insight’s recent report, ‘Balancing today and tomorrow’,5 provides clear evidence for this.
Their real–world testing of sidecar savings shows that when people have a dedicated space to build short–
term emergency cash alongside their pension, it creates a vital safety net. Instead of competing with pension
saving, having this liquid cash cushion actually protects it. It means when an unexpected bill hits, savers do
not have to choose between immediate financial survival and their retirement future, which dramatically
reduces the risk of them opting out of the pension scheme entirely.
3.48. The success of AE also demonstrates the importance of behavioural policy interventions. Participation rates
have been driven far more by inertia and default mechanisms than by active financial planning. Similar
behavioural approaches should be considered in areas such as contribution escalation, member engagement
and retirement income solutions. Reforms that successfully harness behavioural tendencies are likely to
prove more effective than those which rely on individuals repeatedly making complex financial decisions
throughout their working lives.
The participation gap: who misses out on pension saving and why it matters
Education, Communication, and member understanding
3.49. The interim report provides extensive evidence as to the under saving – and in some cases a complete lack of
pensions saving – that is commonplace among certain groups of working–age people. The SPP agrees that
gaining a deeper understanding of the reasons for these participation gaps and working to address them will
be a crucial factor in improving pensions adequacy in the UK.
3.50. Key to addressing these gaps should be an overarching drive and commitment to increasing pension
awareness by providing comprehensive financial education and tools to help people better understand the
long–term benefits of pension savings.
3.51. We feel that this should start with a systematic progressive programme of financial education starting at
primary school – introducing for example key concepts like compound interest and as children get older,
moving to include the tax advantages of pensions, and the “free” money that employer contributions
essentially are. This must go well beyond the planned curriculum reforms due to come into force in 2028.
Meaningful, consistent and age appropriate financial education would be likely to help people better
understand how pensions operate and why an early start to pension saving is beneficial even if the amounts
saved might be by necessarily small to begin with. Introducing these concepts from primary school age
upwards, in bite size format, reinforced by frequent repetition and extension would mean that the public are
more likely to enter the workforce with an understanding of any pension offering that is being made available
to them and would therefore be more inclined to save and engage.
3.52. Once individuals have joined the workforce, employers should also play their part in providing information,
support, and guidance to encourage greater workplace saving. To this end we reiterate the SPP’s previous
suggestion of introducing a requirement for all large employers (with 250+ employees) to offer some form of
financial education (including pensions) to their workforce on an ongoing basis.6
3.53. That said, the SPP also notes that improved information and visibility, through financial education or pensions
dashboards, will not always in itself translate into better decision–making or outcomes because many
individuals struggle not with access to information, but with interpreting what it means for their own retirement
prospects. One potential solution to this would be the addition of a Pensions Health Check, linked directly to
the pensions dashboard. This would provide:
– A simple, personalised assessment of an individual’s retirement readiness;
– Clear, accessible benchmarks against adequacy measures;
decisions often sit alongside housing costs, debt repayment and the need to build short–term financial
resilience. This reinforces the case for policies that complement pension saving rather than compete with
these objectives. Measures such as sidecar savings arrangements, improved payroll savings mechanisms
and other approaches that strengthen financial resilience may ultimately support higher levels of long–term
pension saving by reducing the likelihood that individuals opt out of pension saving when faced with financial
pressures. Nest Insight’s recent report, ‘Balancing today and tomorrow’,5 provides clear evidence for this.
Their real–world testing of sidecar savings shows that when people have a dedicated space to build short–
term emergency cash alongside their pension, it creates a vital safety net. Instead of competing with pension
saving, having this liquid cash cushion actually protects it. It means when an unexpected bill hits, savers do
not have to choose between immediate financial survival and their retirement future, which dramatically
reduces the risk of them opting out of the pension scheme entirely.
3.48. The success of AE also demonstrates the importance of behavioural policy interventions. Participation rates
have been driven far more by inertia and default mechanisms than by active financial planning. Similar
behavioural approaches should be considered in areas such as contribution escalation, member engagement
and retirement income solutions. Reforms that successfully harness behavioural tendencies are likely to
prove more effective than those which rely on individuals repeatedly making complex financial decisions
throughout their working lives.
The participation gap: who misses out on pension saving and why it matters
Education, Communication, and member understanding
3.49. The interim report provides extensive evidence as to the under saving – and in some cases a complete lack of
pensions saving – that is commonplace among certain groups of working–age people. The SPP agrees that
gaining a deeper understanding of the reasons for these participation gaps and working to address them will
be a crucial factor in improving pensions adequacy in the UK.
3.50. Key to addressing these gaps should be an overarching drive and commitment to increasing pension
awareness by providing comprehensive financial education and tools to help people better understand the
long–term benefits of pension savings.
3.51. We feel that this should start with a systematic progressive programme of financial education starting at
primary school – introducing for example key concepts like compound interest and as children get older,
moving to include the tax advantages of pensions, and the “free” money that employer contributions
essentially are. This must go well beyond the planned curriculum reforms due to come into force in 2028.
Meaningful, consistent and age appropriate financial education would be likely to help people better
understand how pensions operate and why an early start to pension saving is beneficial even if the amounts
saved might be by necessarily small to begin with. Introducing these concepts from primary school age
upwards, in bite size format, reinforced by frequent repetition and extension would mean that the public are
more likely to enter the workforce with an understanding of any pension offering that is being made available
to them and would therefore be more inclined to save and engage.
3.52. Once individuals have joined the workforce, employers should also play their part in providing information,
support, and guidance to encourage greater workplace saving. To this end we reiterate the SPP’s previous
suggestion of introducing a requirement for all large employers (with 250+ employees) to offer some form of
financial education (including pensions) to their workforce on an ongoing basis.6
3.53. That said, the SPP also notes that improved information and visibility, through financial education or pensions
dashboards, will not always in itself translate into better decision–making or outcomes because many
individuals struggle not with access to information, but with interpreting what it means for their own retirement
prospects. One potential solution to this would be the addition of a Pensions Health Check, linked directly to
the pensions dashboard. This would provide:
– A simple, personalised assessment of an individual’s retirement readiness;
– Clear, accessible benchmarks against adequacy measures;
5 Nest Insight, Balancing today and tomorrow, June 2026:
https://www.nestinsight.org.uk/wp–content/uploads/2026/06/Balancing–today–and–tomorrow.pdf
6 Saving retirement: Who is at risk and why? The Society of Pension Professionals, August 2025:
https://the–spp.co.uk/wp–content/uploads/SPP–Saving–Retirement–21.8.25.pdf
Prompts for next steps, such as increasing contributions or seeking guidance.
3.54. This kind of intervention would help bridge the gap between information and action, ensuring that greater
transparency leads to meaningful behavioural change.
3.55. As our “Saving Retirement” paper7 also recommended, generally speaking the government and industry
should explore how best to improve pensions related communications to educate, help dispel mistrust and
improve understanding of the protections and benefits offered by pensions.
3.56. Digital exclusion also needs to be considered. According to Ofcom, those without internet access in the UK
equate to 5% of the population (2.8m people); over half of users who are offline are under 74, challenging the
perception that age is the predominant factor in determining uptake of digital services. Furthermore, 8% who
are using the internet lack confidence online.8 This is clearly an issue that should be brought into any
initiatives around improving pension communications and education.
3.57. Furthermore, it is worth noting that whilst the SPP’s 2026 AI Survey showed that AI usage is now universal
amongst pension firms9, YouGov10 recently revealed that around a third of the adult population in the UK say
they never use AI tools such as ChatGPT and that nearly three quarters of the adult population does not trust
AI to act on their behalf.
3.58. The SPP’s view that the roll–out of such a focussed program of education as a fundamental building block in
reducing participation gaps and thus improving adequacy, is also reinforced by the evidence set out in the
interim report around the high value that people place on pension contributions that they are already making
when making financial decisions, and the reluctance to reduce these contributions or to opt out in response to
adverse changes in economic conditions.
The Self–Employed
3.59. The SPP is aligned with the Commission in believing that self–employed participation in pensions saving is
one of the most urgent challenges for the UK pension system. It is also notable that the disparity in pension
savings between workers and the self–employed contributes to pension gaps for certain ethic minority groups,
women and the disabled, where self–employment is more common.
3.60. Voluntary pension saving alone is not sufficient to meet the needs of the self–employed. It is difficult to see
how this problem can be adequately addressed without introducing an equivalent to the AE system for the
self–employed. The success of AE for workers has proven the efficacy of inertia in boosting pensions saving.
3.61. The design of a “one–size fits all” system of AE for the self–employed would inevitably be complex, given the
different forms of self–employment that exist (sole traders, workers in the gig economy, directors of limited
companies). It is worth noting at this point that, while we may colloquially regard all these categories as “self–
employed,” directors of limited companies are not self–employed for tax and national insurance purposes and
will not be registered as such and some workers in the gig economy, while remaining self–employed for tax
and national insurance purposes, already qualify for auto–enrolment.
3.62. Those employed as directors of limited companies often receive a combination of earnings from employment
and from dividends as shareholders from their business. At present, they do not have to be automatically
enrolled into a pension because of their status as a director. One option for this group would be to remove or
restrict the exemption for directors in the current AE regime, although this would only capture employment
earnings. However, once enrolled into a pension, it is more likely that this group would make additional
pension contributions recognising their other forms of income, particularly if provided with well–designed
communications on pensions adequacy.
7 Saving retirement: Who is at risk and why? The Society of Pension Professionals, August 2025:
https://the–spp.co.uk/wp–content/uploads/SPP–Saving–Retirement–21.8.25.pdf
8 Ofcom, Exploring how people in the UK are affected by ‘digital disadvantage’, April 2025:
https://www.ofcom.org.uk/internet–based–services/technology/exploring–how–people–in–the–uk–are–affected–by–digital–
disadvantage
9 AI usage ‘universal’ across pensions – SPP” April 2026:
https://www.pensionsage.com/pa/AI–usage–universal–across–pensions–SPP.php
10 Brits are happy to use AI but still don’t trust it, YouGov, December 2025:
https://yougov.com/en–gb/articles/53709–trust–in–ai–uk–2025
transparency leads to meaningful behavioural change.
3.55. As our “Saving Retirement” paper7 also recommended, generally speaking the government and industry
should explore how best to improve pensions related communications to educate, help dispel mistrust and
improve understanding of the protections and benefits offered by pensions.
3.56. Digital exclusion also needs to be considered. According to Ofcom, those without internet access in the UK
equate to 5% of the population (2.8m people); over half of users who are offline are under 74, challenging the
perception that age is the predominant factor in determining uptake of digital services. Furthermore, 8% who
are using the internet lack confidence online.8 This is clearly an issue that should be brought into any
initiatives around improving pension communications and education.
3.57. Furthermore, it is worth noting that whilst the SPP’s 2026 AI Survey showed that AI usage is now universal
amongst pension firms9, YouGov10 recently revealed that around a third of the adult population in the UK say
they never use AI tools such as ChatGPT and that nearly three quarters of the adult population does not trust
AI to act on their behalf.
3.58. The SPP’s view that the roll–out of such a focussed program of education as a fundamental building block in
reducing participation gaps and thus improving adequacy, is also reinforced by the evidence set out in the
interim report around the high value that people place on pension contributions that they are already making
when making financial decisions, and the reluctance to reduce these contributions or to opt out in response to
adverse changes in economic conditions.
The Self–Employed
3.59. The SPP is aligned with the Commission in believing that self–employed participation in pensions saving is
one of the most urgent challenges for the UK pension system. It is also notable that the disparity in pension
savings between workers and the self–employed contributes to pension gaps for certain ethic minority groups,
women and the disabled, where self–employment is more common.
3.60. Voluntary pension saving alone is not sufficient to meet the needs of the self–employed. It is difficult to see
how this problem can be adequately addressed without introducing an equivalent to the AE system for the
self–employed. The success of AE for workers has proven the efficacy of inertia in boosting pensions saving.
3.61. The design of a “one–size fits all” system of AE for the self–employed would inevitably be complex, given the
different forms of self–employment that exist (sole traders, workers in the gig economy, directors of limited
companies). It is worth noting at this point that, while we may colloquially regard all these categories as “self–
employed,” directors of limited companies are not self–employed for tax and national insurance purposes and
will not be registered as such and some workers in the gig economy, while remaining self–employed for tax
and national insurance purposes, already qualify for auto–enrolment.
3.62. Those employed as directors of limited companies often receive a combination of earnings from employment
and from dividends as shareholders from their business. At present, they do not have to be automatically
enrolled into a pension because of their status as a director. One option for this group would be to remove or
restrict the exemption for directors in the current AE regime, although this would only capture employment
earnings. However, once enrolled into a pension, it is more likely that this group would make additional
pension contributions recognising their other forms of income, particularly if provided with well–designed
communications on pensions adequacy.
7 Saving retirement: Who is at risk and why? The Society of Pension Professionals, August 2025:
https://the–spp.co.uk/wp–content/uploads/SPP–Saving–Retirement–21.8.25.pdf
8 Ofcom, Exploring how people in the UK are affected by ‘digital disadvantage’, April 2025:
https://www.ofcom.org.uk/internet–based–services/technology/exploring–how–people–in–the–uk–are–affected–by–digital–
disadvantage
9 AI usage ‘universal’ across pensions – SPP” April 2026:
https://www.pensionsage.com/pa/AI–usage–universal–across–pensions–SPP.php
10 Brits are happy to use AI but still don’t trust it, YouGov, December 2025:
https://yougov.com/en–gb/articles/53709–trust–in–ai–uk–2025
For sole traders, more extensive reforms are essential.
This group are registered as self–employed with
HMRC and the simplest solution might be to look at deducting pension contributions as a percentage of
profits through the mechanism of Self–Assessment. This would, of course, require an adjustment to HMRC’s
existing systems. A few issues would require careful thought, including:
• An opt–out mechanism to be administered by HMRC or a third party;
• Whether the thresholds and contribution rates applicable to workers are appropriate for the self–
employed and whether contributions should be phased in over time; and
• Whether appropriate savings vehicles exist into which sole traders could be automatically enrolled,
and how a default pension vehicle could be selected, perhaps on a “carousel” basis, while providing
the ability for self–employed individuals to select a different pension provider if they wish to do so.
3.64. The task would be simplified if the government were willing to initiate a state–backed default pension scheme
for the self–employed, likely as an extension to NEST.
3.65. It may also be desirable for the self–employed to have access to collective defined contribution (CDC)
provision, to avoid the creation of further disparities in pension provision between workers and the self–
employed. The focus on providing an income for life with no complex decumulation decisions could help
support retirement planning, while CDC risk pooling could materially improve income levels for the same
contributions in a whole–of–life model. As a first step, CDC could be made available to the self–employed
through the development of a retail market, although this would require legislative change. A more ambitious
step would be to establish a state–backed default pension scheme for the self–employed on a CDC basis.
3.66. A pension scheme with a sidecar savings option might also be attractive to the self–employed, given that their
earnings tend to fluctuate and access to emergency funds in lower–income years is particularly important for
this group.
3.67. Nest Insight’s recent research11 strongly backs up this approach for the self–employed. Because their income
goes up and down, standard rigid pension structures often feel too risky or restrictive for them. By linking a
pension directly with a flexible sidecar savings account, self–employed savers can have the confidence that
their money is not entirely locked away if their employment situation becomes more challenging. Providing
this liquid financial cushion is a practical way to help overcome any hesitation to save that many of the self–
employed may have, helping them balance today’s business realities with tomorrow’s retirement security.
3.68. There are also those who operate through platform providers in the gig economy, some of whom are already
categorised as workers for the purposes of auto–enrolment. These individuals already have access to
“workplace” pension saving if they meet the auto–enrolment thresholds. The expansion of pension provision
for this group could be through adjustments to the auto–enrolment thresholds but also by clarifying the
definition of “worker” to ensure parity of treatment for all who operate through platform providers. The SPP
would be agnostic about whether or not those operating through platform providers should be treated as
workers for auto–enrolment purposes, provided that a system of auto–enrolment for the self–employed had
been established.
HMRC and the simplest solution might be to look at deducting pension contributions as a percentage of
profits through the mechanism of Self–Assessment. This would, of course, require an adjustment to HMRC’s
existing systems. A few issues would require careful thought, including:
• An opt–out mechanism to be administered by HMRC or a third party;
• Whether the thresholds and contribution rates applicable to workers are appropriate for the self–
employed and whether contributions should be phased in over time; and
• Whether appropriate savings vehicles exist into which sole traders could be automatically enrolled,
and how a default pension vehicle could be selected, perhaps on a “carousel” basis, while providing
the ability for self–employed individuals to select a different pension provider if they wish to do so.
3.64. The task would be simplified if the government were willing to initiate a state–backed default pension scheme
for the self–employed, likely as an extension to NEST.
3.65. It may also be desirable for the self–employed to have access to collective defined contribution (CDC)
provision, to avoid the creation of further disparities in pension provision between workers and the self–
employed. The focus on providing an income for life with no complex decumulation decisions could help
support retirement planning, while CDC risk pooling could materially improve income levels for the same
contributions in a whole–of–life model. As a first step, CDC could be made available to the self–employed
through the development of a retail market, although this would require legislative change. A more ambitious
step would be to establish a state–backed default pension scheme for the self–employed on a CDC basis.
3.66. A pension scheme with a sidecar savings option might also be attractive to the self–employed, given that their
earnings tend to fluctuate and access to emergency funds in lower–income years is particularly important for
this group.
3.67. Nest Insight’s recent research11 strongly backs up this approach for the self–employed. Because their income
goes up and down, standard rigid pension structures often feel too risky or restrictive for them. By linking a
pension directly with a flexible sidecar savings account, self–employed savers can have the confidence that
their money is not entirely locked away if their employment situation becomes more challenging. Providing
this liquid financial cushion is a practical way to help overcome any hesitation to save that many of the self–
employed may have, helping them balance today’s business realities with tomorrow’s retirement security.
3.68. There are also those who operate through platform providers in the gig economy, some of whom are already
categorised as workers for the purposes of auto–enrolment. These individuals already have access to
“workplace” pension saving if they meet the auto–enrolment thresholds. The expansion of pension provision
for this group could be through adjustments to the auto–enrolment thresholds but also by clarifying the
definition of “worker” to ensure parity of treatment for all who operate through platform providers. The SPP
would be agnostic about whether or not those operating through platform providers should be treated as
workers for auto–enrolment purposes, provided that a system of auto–enrolment for the self–employed had
been established.
The Gender Pensions Gap
3.69. The Interim report has identified that “women are more likely to work part–time, step out of paid employment
for periods of caring, earn less on average, and are more likely to work in roles or sectors with weaker access
to pensions saving.”
3.70. The key driver of the gender pensions gap is the gender pay gap, with discrepancies in annual income
compounded over time by the impact of investment returns. A complete solution to the gender pensions gap
would therefore require significant social change. This could be supported to some extent by government
policies – access to affordable childcare, eldercare and flexible working policies that make it a genuine option
for both partners in a couple to work part–time without prejudicing their long–term progression and earning
capacity – but this will only happen if it is seen as a genuine priority by government and constructed in a way
that promotes the health of family units as well as the UK economy. In the best–case scenario, achieving
gender pensions equity will take decades.
3.71. Nevertheless, in addition to these long–term policies, there are steps that could be explored in the short–term
to improve the situation.
11 Nest Insight, Balancing today and tomorrow, June 2026:
https://www.nestinsight.org.uk/wp–content/uploads/2026/06/Balancing–today–and–tomorrow.pdf
3.72. At present, it is common for employee pension contributions to reduce while an employee is on maternity
leave or shared parental leave because they are based on pay received rather than the earnings the
employee would have received if working normally. Employer pension contributions continue to be based on
normal pay, provided the employee is on paid maternity leave, but frequently stop after the 39th week of
maternity leave when statutory maternity pay ceases to be available. While it is open to employees to pay
more on their return from maternity leave to make good these gaps, this is generally only a realistic option for
higher earners. These gaps could instead be addressed by requiring the employer to contribute throughout
an employee’s maternity or shared parental leave and by the government making good the deficit in the
employee contributions over the same period up to an agreed limit.
3.73. As already highlighted, a review of AE thresholds is crucial for this group as the current thresholds exclude
many women from automatic pension saving and receipt of employer contributions, because they work fewer
hours than their male counterparts and/or work in multiple employments, causing them to fall short of the
earnings trigger and limiting their qualifying earnings in a given employment. These thresholds were put in
place, in large part to protect lower earners from unaffordable pension contributions but it also deprives them
of the employer contributions they would receive if they qualified for AE. As the interim report notes, many of
these lower earning women live in higher income households and could afford to pay contributions at the AE
level. These protections are in any event arguably unnecessary given the ability to opt–out of pension saving.
Requiring employers to automatically enrol and pay employer contributions for all workers from the first
pound earned, regardless of whether member contributions are payable, would also go some distance to
bridging the gender pensions gap.
3.74. Depending on how they are structured, CDC schemes could also assist in reducing the gender pensions gap.
In the past, spouses and financially dependent partners often received protection from their partner’s defined
benefits scheme, which would pay a survivor’s pension, typically 50–66% of the member’s pension. While it is
possible to secure joint life annuities in the DC space, this has become less common and the left–over
drawdown funds are generally only used to secure an income for the wealthiest, otherwise typically being
paid out in lump sum form on death. CDC schemes could easily replicate the concept of a survivor’s pension
and ensure a protected income stream for the longer–lived partner.
3.75. In addition, it is possible to set up CDC schemes to operate on a unisex basis. Under this approach there
would be an underlying cross–subsidy towards female members given their higher life expectancy.
3.76. Returning to the DC environment, it is currently possible for a taxpayer to contribute to their partner’s
pension, in which case the contributions receive tax relief at the partner’s marginal rate. However, this is not
an attractive option for a higher rate taxpayer (unless they have exhausted their own annual allowance) if
their partner would only be entitled to basic rate tax relief. If it were equally tax efficient for the higher earning
partner to contribute to their lower earning partner’s pension, this would encourage a more even distribution
of pension saving between a couple. It is not realistic to expect a higher rate taxpayer to pay into the pension
of partner who is a basic rate taxpayer (or who does not pay tax at all) in preference to their own pension if
this increases their annual tax bill. Given the tiny number of taxpayers capable of exceeding the tax
allowances for their own pension saving, it is unsurprising that the option to save into a partner’s pension has
exceptionally low take–up.
3.77. The SPP would also welcome exploration of the creation of a pension product that allows couples to save
jointly for their retirement, akin to a joint bank account. There is a real logic to this approach given the
availability of couple’s metrics for target pension income. This could give both partners clearer insight into
their pension saving position and facilitate good decision–making for retirement. Careful thought would be
needed around structuring suitable decumulation solutions for such arrangements and whether there should
be limits on amounts that can be crystallised before both partners are over normal minimum pension age.
Similarly, thought would need to be given to arrangements in the event of divorce, early death and so on.
Ethnic Minority Groups
3.78. As evidence highlighted in the interim report shows, it is clear that some ethnic minority groups have
significantly lower rates of pension participation than white British groups which will often lead to significantly
worse pension outcomes for this demographic.
3.79. While some of this is undoubtedly driven by lower employment levels, more multiple employments resulting in
individuals often not hitting the auto–enrolment threshold, lower earnings and more time out of the workforce
(particularly for women), what is interesting here is that there are more complex factors at play that are
important to understand if we are to improve the retirement outcomes for this group.
leave or shared parental leave because they are based on pay received rather than the earnings the
employee would have received if working normally. Employer pension contributions continue to be based on
normal pay, provided the employee is on paid maternity leave, but frequently stop after the 39th week of
maternity leave when statutory maternity pay ceases to be available. While it is open to employees to pay
more on their return from maternity leave to make good these gaps, this is generally only a realistic option for
higher earners. These gaps could instead be addressed by requiring the employer to contribute throughout
an employee’s maternity or shared parental leave and by the government making good the deficit in the
employee contributions over the same period up to an agreed limit.
3.73. As already highlighted, a review of AE thresholds is crucial for this group as the current thresholds exclude
many women from automatic pension saving and receipt of employer contributions, because they work fewer
hours than their male counterparts and/or work in multiple employments, causing them to fall short of the
earnings trigger and limiting their qualifying earnings in a given employment. These thresholds were put in
place, in large part to protect lower earners from unaffordable pension contributions but it also deprives them
of the employer contributions they would receive if they qualified for AE. As the interim report notes, many of
these lower earning women live in higher income households and could afford to pay contributions at the AE
level. These protections are in any event arguably unnecessary given the ability to opt–out of pension saving.
Requiring employers to automatically enrol and pay employer contributions for all workers from the first
pound earned, regardless of whether member contributions are payable, would also go some distance to
bridging the gender pensions gap.
3.74. Depending on how they are structured, CDC schemes could also assist in reducing the gender pensions gap.
In the past, spouses and financially dependent partners often received protection from their partner’s defined
benefits scheme, which would pay a survivor’s pension, typically 50–66% of the member’s pension. While it is
possible to secure joint life annuities in the DC space, this has become less common and the left–over
drawdown funds are generally only used to secure an income for the wealthiest, otherwise typically being
paid out in lump sum form on death. CDC schemes could easily replicate the concept of a survivor’s pension
and ensure a protected income stream for the longer–lived partner.
3.75. In addition, it is possible to set up CDC schemes to operate on a unisex basis. Under this approach there
would be an underlying cross–subsidy towards female members given their higher life expectancy.
3.76. Returning to the DC environment, it is currently possible for a taxpayer to contribute to their partner’s
pension, in which case the contributions receive tax relief at the partner’s marginal rate. However, this is not
an attractive option for a higher rate taxpayer (unless they have exhausted their own annual allowance) if
their partner would only be entitled to basic rate tax relief. If it were equally tax efficient for the higher earning
partner to contribute to their lower earning partner’s pension, this would encourage a more even distribution
of pension saving between a couple. It is not realistic to expect a higher rate taxpayer to pay into the pension
of partner who is a basic rate taxpayer (or who does not pay tax at all) in preference to their own pension if
this increases their annual tax bill. Given the tiny number of taxpayers capable of exceeding the tax
allowances for their own pension saving, it is unsurprising that the option to save into a partner’s pension has
exceptionally low take–up.
3.77. The SPP would also welcome exploration of the creation of a pension product that allows couples to save
jointly for their retirement, akin to a joint bank account. There is a real logic to this approach given the
availability of couple’s metrics for target pension income. This could give both partners clearer insight into
their pension saving position and facilitate good decision–making for retirement. Careful thought would be
needed around structuring suitable decumulation solutions for such arrangements and whether there should
be limits on amounts that can be crystallised before both partners are over normal minimum pension age.
Similarly, thought would need to be given to arrangements in the event of divorce, early death and so on.
Ethnic Minority Groups
3.78. As evidence highlighted in the interim report shows, it is clear that some ethnic minority groups have
significantly lower rates of pension participation than white British groups which will often lead to significantly
worse pension outcomes for this demographic.
3.79. While some of this is undoubtedly driven by lower employment levels, more multiple employments resulting in
individuals often not hitting the auto–enrolment threshold, lower earnings and more time out of the workforce
(particularly for women), what is interesting here is that there are more complex factors at play that are
important to understand if we are to improve the retirement outcomes for this group.
3.80. Research shows that economics alone does not explain why the people of ethnic minority backgrounds are
less likely to be saving into pensions12. There are a multitude of complex contributory factors including
mistrust and lack of engagement fostered in part by cultural unfamiliarity with the concept of pensions and
concerns about whether pension style savings are compatible with restrictions placed by certain faith systems
as highlighted in the interim report in relation to concerns around the availability of Halal investments for
Muslim savers.
3.81. What is also clear from the same research13 is that many ethnic minority groups have deeply embedded
cultural approaches to money and savings which results in their preferred mode of saving for retirement being
in alternative assets such as businesses or property or community saving schemes rather than pensions. In
order to tackle this participation gap, we should first recognise that for many this may well be the right
decision. However, it is apparent that the pensions industry may be falling short given many from an ethnic
minority background do not feel equipped to place pensions on an equal footing with other more familiar
options when deciding how and where best to save.
3.82. Looking at the gender and ethnicity gap together, it is also clear that the participation gap is exacerbated
where gender and ethnicity intersect.14 However, while the linked research does highlight the issues that
create barriers for this intersectional group of potential pension savers it does also highlight that there is not
only an increasing likelihood that they will more often than not have funds available to save (into a pension or
otherwise) but also an appetite for more information and education on how pensions work and what they can
deliver in order to consider them as a viable option for saving for retirement.
3.83. For ethnicity pension gaps therefore, improved communication from both the state and industry, tailored to
factor in likely misconceptions and cultural caution, are likely to dispel some of the more damaging myths
associated with pension saving and help those (disproportionally from ethnic minority backgrounds) who are
mistrustful or expectant that their retirement will be supported by other means, to better understand the
framework within which workplace pensions operate and the many protections and benefits that are in place.
less likely to be saving into pensions12. There are a multitude of complex contributory factors including
mistrust and lack of engagement fostered in part by cultural unfamiliarity with the concept of pensions and
concerns about whether pension style savings are compatible with restrictions placed by certain faith systems
as highlighted in the interim report in relation to concerns around the availability of Halal investments for
Muslim savers.
3.81. What is also clear from the same research13 is that many ethnic minority groups have deeply embedded
cultural approaches to money and savings which results in their preferred mode of saving for retirement being
in alternative assets such as businesses or property or community saving schemes rather than pensions. In
order to tackle this participation gap, we should first recognise that for many this may well be the right
decision. However, it is apparent that the pensions industry may be falling short given many from an ethnic
minority background do not feel equipped to place pensions on an equal footing with other more familiar
options when deciding how and where best to save.
3.82. Looking at the gender and ethnicity gap together, it is also clear that the participation gap is exacerbated
where gender and ethnicity intersect.14 However, while the linked research does highlight the issues that
create barriers for this intersectional group of potential pension savers it does also highlight that there is not
only an increasing likelihood that they will more often than not have funds available to save (into a pension or
otherwise) but also an appetite for more information and education on how pensions work and what they can
deliver in order to consider them as a viable option for saving for retirement.
3.83. For ethnicity pension gaps therefore, improved communication from both the state and industry, tailored to
factor in likely misconceptions and cultural caution, are likely to dispel some of the more damaging myths
associated with pension saving and help those (disproportionally from ethnic minority backgrounds) who are
mistrustful or expectant that their retirement will be supported by other means, to better understand the
framework within which workplace pensions operate and the many protections and benefits that are in place.
Disabled People
3.84. The evidence the interim report presents on the significantly higher risk of under saving that disabled people
face, in particular that over half of disabled people at age 46 have no pension wealth at all, is stark, though
not unexpected.
3.85. The SPP agrees with the assessment that the lower pension wealth accumulated by disabled people is
largely due to lower employment rates, higher rates of interrupted or part–time work and labour market
barriers that limit both access to and progression within paid work. It is also worth noting that those with a
disability in employment are more likely to be self–employed15.
3.86. It seems to us that the key to improving the pensions experience for this group of savers is primarily to
improve accessibility to work for those who are able to participate – be it by targeted support for home
working or specialist software and training or requiring employers to be more flexible about employment
conditions like working hours or job sharing.
3.87. Strategies we have suggested in section 3 above could also be considered here, for example the ability for a
higher paid partner to contribute to the pension of a disabled partner who might earn less or the creation of a
pension product that allows couples to save jointly for their retirement.
12 Just don’t mention the pension: the ethnicity pensions gap, L&G Investment Managers, 2023:
https://am.landg.com/asset/4a7e00/globalassets/lgim/capabilities/defined–contribution/dc–retirement–solutions/the–ethnicity–
pensions–gap–report.pdf
13 Ibid
14 A glimmer of light on the Horizon? January 2026:
https://lcpuk.foleon.com/gender–ethnicity–pension–gap/gender–ethnicity–pension–gap–report–2026/
15 The employment of disabled people 2024. 2025:
https://www.gov.uk/government/statistics/the–employment–of–disabled–people–2024/the–employment–of–disabled–people–2024
face, in particular that over half of disabled people at age 46 have no pension wealth at all, is stark, though
not unexpected.
3.85. The SPP agrees with the assessment that the lower pension wealth accumulated by disabled people is
largely due to lower employment rates, higher rates of interrupted or part–time work and labour market
barriers that limit both access to and progression within paid work. It is also worth noting that those with a
disability in employment are more likely to be self–employed15.
3.86. It seems to us that the key to improving the pensions experience for this group of savers is primarily to
improve accessibility to work for those who are able to participate – be it by targeted support for home
working or specialist software and training or requiring employers to be more flexible about employment
conditions like working hours or job sharing.
3.87. Strategies we have suggested in section 3 above could also be considered here, for example the ability for a
higher paid partner to contribute to the pension of a disabled partner who might earn less or the creation of a
pension product that allows couples to save jointly for their retirement.
12 Just don’t mention the pension: the ethnicity pensions gap, L&G Investment Managers, 2023:
https://am.landg.com/asset/4a7e00/globalassets/lgim/capabilities/defined–contribution/dc–retirement–solutions/the–ethnicity–
pensions–gap–report.pdf
13 Ibid
14 A glimmer of light on the Horizon? January 2026:
https://lcpuk.foleon.com/gender–ethnicity–pension–gap/gender–ethnicity–pension–gap–report–2026/
15 The employment of disabled people 2024. 2025:
https://www.gov.uk/government/statistics/the–employment–of–disabled–people–2024/the–employment–of–disabled–people–2024
Carers
3.88. The interim report highlights the significant pensions participation gap faced by carers, due to having to work
part–time or taking time out of the labour market to accommodate unpaid caring responsibilities.
3.89. While acknowledging that the reforms made in 201016 to entitle carers to national insurance credits will help
to ensure that those who have to give up paid work (even if only temporarily) to care for someone else could
maintain their entitlement to a full State Pension, the low take–up rate of these credits clearly mean they are
not benefitting everyone that they could.
3.90. This again takes us back to our overarching theme of the need for a tailored communications programme
targeting those in these circumstances. Strategies we would suggest include putting more information in
places that carers would be likely to see them in the course of their caring role – GP’s surgeries for example
or direct mailouts or targeted media campaigns.
3.91. As the interim report notes, this group will also be more at risk of accessing pensions early due to the inability
to spend enough time in paid employment away from caring responsibilities. Tailored and targeted
communications about factors to consider and the potential longer–term consequences of such actions could
again help people in this position make more informed choices.
3.92. Caregivers are more often than not women and this intersectional participation gap therefore also contributes
to the gender pension gap. Again, strategies we have suggested in section 3 above including the ability for a
higher paid partner to contribute to the pension of a partner who earns less or the creation of a pension
product that allows couples to save jointly for their retirement would be similarly effective here.
3.93. As the SPP’s “Saving Retirement” paper suggested last year, “To help the 2.3m working as carers who
currently receive no income, the Commission should explore the practicalities of introducing a carer’s credit
and increasing the existing £2,880 limit on which pension tax relief is payable for non–taxpayers.”17
3.94. Increasing the £2,880 limit (on which pension tax relief is payable for non–taxpayers (not increased for more
than a quarter of a century), would not only help carers, but it might also better encourage parents and
grandparents to consider saving into a pension for the under 18s and may be helpful for non–working
spouses, helping to reduce the gender pensions gap.
part–time or taking time out of the labour market to accommodate unpaid caring responsibilities.
3.89. While acknowledging that the reforms made in 201016 to entitle carers to national insurance credits will help
to ensure that those who have to give up paid work (even if only temporarily) to care for someone else could
maintain their entitlement to a full State Pension, the low take–up rate of these credits clearly mean they are
not benefitting everyone that they could.
3.90. This again takes us back to our overarching theme of the need for a tailored communications programme
targeting those in these circumstances. Strategies we would suggest include putting more information in
places that carers would be likely to see them in the course of their caring role – GP’s surgeries for example
or direct mailouts or targeted media campaigns.
3.91. As the interim report notes, this group will also be more at risk of accessing pensions early due to the inability
to spend enough time in paid employment away from caring responsibilities. Tailored and targeted
communications about factors to consider and the potential longer–term consequences of such actions could
again help people in this position make more informed choices.
3.92. Caregivers are more often than not women and this intersectional participation gap therefore also contributes
to the gender pension gap. Again, strategies we have suggested in section 3 above including the ability for a
higher paid partner to contribute to the pension of a partner who earns less or the creation of a pension
product that allows couples to save jointly for their retirement would be similarly effective here.
3.93. As the SPP’s “Saving Retirement” paper suggested last year, “To help the 2.3m working as carers who
currently receive no income, the Commission should explore the practicalities of introducing a carer’s credit
and increasing the existing £2,880 limit on which pension tax relief is payable for non–taxpayers.”17
3.94. Increasing the £2,880 limit (on which pension tax relief is payable for non–taxpayers (not increased for more
than a quarter of a century), would not only help carers, but it might also better encourage parents and
grandparents to consider saving into a pension for the under 18s and may be helpful for non–working
spouses, helping to reduce the gender pensions gap.
Extension of Working Life and Pension Savings
3.95. The interim report recognises the need for people to work for longer. We agree that, alongside the
importance of financial education, the development of flexible employment opportunities is key to retaining
older workers in the labour market, helping to address their own health needs and facilitate their caring
responsibilities.
3.96. While retaining older workers in the labour market might reduce the early drawdown of pension assets, the
opportunity to accumulate additional pension assets should also be considered. We query why workers
continuing to work beyond state pension age should not benefit from AE and employer contributions. If
individuals are continuing to work beyond State Pension Age because they do not feel they can afford to
retire, or because they want to save for a higher standard of living in retirement, they would benefit greatly
from coverage by the AE system. As flexible retirement becomes increasingly common, the logic of
categorising individuals by age, rather than working status, looks increasingly obsolete.
3.97. More could be done to provide flexible retirement options – allowing employees to have a phased retirement
or part time work will allow older employees to continue earning while accessing pension benefits – a
statutory override to scheme rules to facilitate partial retirement may be worth considering as rules that state
an individual cannot access the pension unless they leave employment or that they have to take the whole
pension remain common.
3.98. Earlier in this response, the need for financial education and advice was highlighted in relation to schools but
to better facilitate later life working, employers offering mid–life financial “MOTs” and targeted pension
guidance to help employees make informed decisions about their retirement savings would no doubt be
welcome.
16 HMRC internal manual, updated June 2026:
https://www.gov.uk/hmrc–internal–manuals/national–insurance–manual/nim41252
17 Saving retirement: Who is at risk and why? The Society of Pension Professionals, August 2025:
https://the–spp.co.uk/wp–content/uploads/SPP–Saving–Retirement–21.8.25.pdf
3.99. Changes in the tax system could also incentivise people to remain in work. In particular, the normal minimum
retirement age (currently 55 but increasing to 57 in 2028) is seen as a target by many. This is compounded
by political risk which has created mistrust in the pensions system, with fears of the abolition of tax–free
pension lump sums surfacing before every Budget, resulting in pension assets being drawn on unnecessarily
early as members seek to avoid “regret risk.” One way of mitigating this issue would be to further increase the
normal minimum pension age. If such an approach were taken, any increases must occur on a phased basis
to avoid pension scheme members rushing to take benefits ahead of a cliff–edge change as is being
experienced in the run–up to April 2028). A commitment from government to make no further changes to
pensions tax–free cash within a prescribed period of time i.e. the lifetime of the current Parliament, would also
be helpful.
3.100. At the other end of the spectrum, the young are also struggling to accumulate pensions wealth. The primary
lever to deal with this is again the AE system. Reducing the age criteria for AE from 22 to 18 would give
younger workers the opportunity to start accumulating pension assets at a younger age, and these assets
would have longer to benefit from compound investment growth. Removal of the earnings trigger and/or
reducing the qualifying earnings threshold would also have significant benefits for this group. So too would
increasing the £2,880 limit on which pension tax relief is payable for non–taxpayers (not increased for more
than a quarter of a century), which would almost certainly encourage parents and grandparents to consider
saving into a pension for the under 18s.
by political risk which has created mistrust in the pensions system, with fears of the abolition of tax–free
pension lump sums surfacing before every Budget, resulting in pension assets being drawn on unnecessarily
early as members seek to avoid “regret risk.” One way of mitigating this issue would be to further increase the
normal minimum pension age. If such an approach were taken, any increases must occur on a phased basis
to avoid pension scheme members rushing to take benefits ahead of a cliff–edge change as is being
experienced in the run–up to April 2028). A commitment from government to make no further changes to
pensions tax–free cash within a prescribed period of time i.e. the lifetime of the current Parliament, would also
be helpful.
3.100. At the other end of the spectrum, the young are also struggling to accumulate pensions wealth. The primary
lever to deal with this is again the AE system. Reducing the age criteria for AE from 22 to 18 would give
younger workers the opportunity to start accumulating pension assets at a younger age, and these assets
would have longer to benefit from compound investment growth. Removal of the earnings trigger and/or
reducing the qualifying earnings threshold would also have significant benefits for this group. So too would
increasing the £2,880 limit on which pension tax relief is payable for non–taxpayers (not increased for more
than a quarter of a century), which would almost certainly encourage parents and grandparents to consider
saving into a pension for the under 18s.
Decumulation as a driver of adequacy
3.101. Traditionally, pension adequacy has focused on accumulation with contribution rates, investment returns and
the length of saving being key components in delivering adequacy. However, two people with identical
pension pots can experience quite different retirement outcomes depending on their decumulation strategy.
As a result, the SPP recommends that the Commission consider the following to improve pension outcomes
at the point of and throughout retirement.
Ensure the power of inertia is brought to bear
3.102. The Government has legislated for Guided Retirement requirements to be applied to workplace pension
savings. While it would be difficult to unwind the introduction of the 2014 pension reforms, we agree with the
Commission’s interim conclusions that stronger defaults are required as most pension savers are not skilled,
informed, or engaged enough to make optimal decumulation decisions.
3.103. We believe that a good default should look to address the two key risks faced by individuals in retirement,
namely longevity and inflation. While this may not be the best outcome for every individual,
trustees/governance committees are well placed to provide a sensible starting point. This would also allow for
improvements in investment strategy glidepaths that are aligned to the default decumulation option.
Trustees/governance committees should be allowed to simplify communications to focus primarily on the
default approach, while noting (but not having to explain in detail) that other options are available.
3.104. In implementing these changes, there is a critical need for clarity on Guided Retirement and Targeted
Support.
3.105. A key priority now is ensuring that there is clear and timely articulation of how Guided Retirement and
Targeted Support will operate alongside one another in practice.
3.106. Providers are already beginning to design the next generation of decumulation offerings. Without sufficient
clarity on the regulatory framework, there is a risk that innovation is slowed, or that firms take a more cautious
approach that limits the development of more effective retirement solutions. In particular, greater clarity would
be valuable in the following areas:
– How the boundaries between Guided Retirement, Targeted Support and regulated advice will be defined
in practice, and how firms can support customers within those boundaries;
– How longevity protection can be incorporated within default or guided pathways, and the extent to which
providers are expected or permitted to include mechanisms that pool or manage longevity risk;
– The role of single points of consent, and how these can operate to allow customers to move more
seamlessly through different stages of the retirement journey while receiving appropriate support.
3.107. Providing clarity on these issues at an early stage will be critical in enabling providers to design coherent
customer journeys, invest in new solutions, and deliver at scale.
savings. While it would be difficult to unwind the introduction of the 2014 pension reforms, we agree with the
Commission’s interim conclusions that stronger defaults are required as most pension savers are not skilled,
informed, or engaged enough to make optimal decumulation decisions.
3.103. We believe that a good default should look to address the two key risks faced by individuals in retirement,
namely longevity and inflation. While this may not be the best outcome for every individual,
trustees/governance committees are well placed to provide a sensible starting point. This would also allow for
improvements in investment strategy glidepaths that are aligned to the default decumulation option.
Trustees/governance committees should be allowed to simplify communications to focus primarily on the
default approach, while noting (but not having to explain in detail) that other options are available.
3.104. In implementing these changes, there is a critical need for clarity on Guided Retirement and Targeted
Support.
3.105. A key priority now is ensuring that there is clear and timely articulation of how Guided Retirement and
Targeted Support will operate alongside one another in practice.
3.106. Providers are already beginning to design the next generation of decumulation offerings. Without sufficient
clarity on the regulatory framework, there is a risk that innovation is slowed, or that firms take a more cautious
approach that limits the development of more effective retirement solutions. In particular, greater clarity would
be valuable in the following areas:
– How the boundaries between Guided Retirement, Targeted Support and regulated advice will be defined
in practice, and how firms can support customers within those boundaries;
– How longevity protection can be incorporated within default or guided pathways, and the extent to which
providers are expected or permitted to include mechanisms that pool or manage longevity risk;
– The role of single points of consent, and how these can operate to allow customers to move more
seamlessly through different stages of the retirement journey while receiving appropriate support.
3.107. Providing clarity on these issues at an early stage will be critical in enabling providers to design coherent
customer journeys, invest in new solutions, and deliver at scale.
3.108. There is an opportunity to ensure that the emerging framework supports a system in which individuals are
effectively guided through complex decisions, rather than being left to navigate them alone, while still
retaining appropriate flexibility and consumer protection.
Reframing tax–free lump sums
3.109. The provision of a 25% tax–free lump sum benefit is both highly valued and a driver of decumulation
decisions that do not always reflect sensible long–term planning, with disadvantages including the risk of
spending the money too quickly, moving it into low–return bank accounts, making poor investment decisions,
withdrawing more pension than they actually need and depleting their pot which results in considerably lower
annuity or drawdown payments in retirement
3.110. The SPP therefore suggests that the Commission encourage the government to examine the advantages and
disadvantages of amending the tax–regime to allow for the 25% tax–free allowance to be spread over time
(e.g. applied to each monthly payment, rather than only in a one–off lump sum).
3.111. Such a change is likely to encourage retirees to focus on income needs rather than extracting capital; it
reduces the premature depletion of pension savings, better aligns tax incentives with retirement income, is
likely to improve investment outcomes and could reduce behavioural distortions.
3.112. This is also likely to be more politically and publicly acceptable than other changes to the 25% tax free cash
sum available because it does not necessarily reduce the overall value of the tax relief. In principle, the
individual still receives tax–free treatment on 25% of their pension benefits; only the timing changes.
3.113. That said, the value of the relief would become contingent on longevity. Those who live longer would receive
more of the tax–free benefit. Those who die younger would receive less. That creates a distributional issue
because life expectancy is strongly correlated with income and wealth. Lower earners are statistically more
likely to die earlier, meaning they would disproportionately lose out from a pure “spread–over–time” model
such as this. There are of course solutions to such a challenge. Perhaps the most obvious would be for any
unused tax–free entitlement at death to be crystallised and paid tax–free to beneficiaries. Alternatively, the tax–
free percentage could be front–loaded – higher proportions of withdrawals are tax–free in the first 10 years of
retirement and the allowance is exhausted more quickly.
effectively guided through complex decisions, rather than being left to navigate them alone, while still
retaining appropriate flexibility and consumer protection.
Reframing tax–free lump sums
3.109. The provision of a 25% tax–free lump sum benefit is both highly valued and a driver of decumulation
decisions that do not always reflect sensible long–term planning, with disadvantages including the risk of
spending the money too quickly, moving it into low–return bank accounts, making poor investment decisions,
withdrawing more pension than they actually need and depleting their pot which results in considerably lower
annuity or drawdown payments in retirement
3.110. The SPP therefore suggests that the Commission encourage the government to examine the advantages and
disadvantages of amending the tax–regime to allow for the 25% tax–free allowance to be spread over time
(e.g. applied to each monthly payment, rather than only in a one–off lump sum).
3.111. Such a change is likely to encourage retirees to focus on income needs rather than extracting capital; it
reduces the premature depletion of pension savings, better aligns tax incentives with retirement income, is
likely to improve investment outcomes and could reduce behavioural distortions.
3.112. This is also likely to be more politically and publicly acceptable than other changes to the 25% tax free cash
sum available because it does not necessarily reduce the overall value of the tax relief. In principle, the
individual still receives tax–free treatment on 25% of their pension benefits; only the timing changes.
3.113. That said, the value of the relief would become contingent on longevity. Those who live longer would receive
more of the tax–free benefit. Those who die younger would receive less. That creates a distributional issue
because life expectancy is strongly correlated with income and wealth. Lower earners are statistically more
likely to die earlier, meaning they would disproportionately lose out from a pure “spread–over–time” model
such as this. There are of course solutions to such a challenge. Perhaps the most obvious would be for any
unused tax–free entitlement at death to be crystallised and paid tax–free to beneficiaries. Alternatively, the tax–
free percentage could be front–loaded – higher proportions of withdrawals are tax–free in the first 10 years of
retirement and the allowance is exhausted more quickly.
Collective Defined Contribution (CDC)
3.114. The SPP welcomes the introduction of Collective Defined Contribution (CDC) arrangements in the UK. CDC
schemes have the potential to address one of the central weaknesses of individual defined contribution
pensions: the requirement for individuals to manage complex investment, inflation and longevity risks
throughout retirement. By pooling these risks across members, CDC arrangements can deliver more efficient
and sustainable retirement incomes than can typically be achieved through individual decision–making alone.
3.115. We support the Government’s decision to extend CDC beyond single–employer schemes to include multi–
employer arrangements. This should enable a much wider range of employers and pension savers to benefit
from collective risk–sharing and professional management. In time, multi–employer CDC schemes could
provide a compelling alternative to traditional individual DC arrangements, particularly for employers seeking
to improve retirement outcomes without assuming defined benefit liabilities.
3.116. From a decumulation perspective, we believe the next priority should be the introduction of Retirement CDC
arrangements. One of the most significant challenges facing retirees is converting accumulated pension
savings into a sustainable income that can last throughout retirement. Retirement CDC schemes offer the
prospect of addressing this challenge by providing a regular income without requiring individuals to make
complex decisions about withdrawal rates, investment strategy, inflation protection or longevity risk. While the
transfer of assets from an individual DC arrangement into a Retirement CDC scheme will require careful
governance, communication and consumer protection, these challenges are manageable and should not
delay the development of what could become an important addition to the UK decumulation market.
3.117. More broadly, we encourage the Commission to consider whether the benefits of collective risk–sharing
should be confined to occupational pensions. At present, CDC arrangements are being developed solely
within an occupational framework, limiting access for many savers. Subject to appropriate regulatory
safeguards, there is a strong case for exploring how CDC–style solutions could be made available within the
retail market. Given the scale of the retirement income challenge facing millions of DC savers, policy should
seek to expand, rather than constrain, access to well–designed collective solutions.
within an occupational framework, limiting access for many savers. Subject to appropriate regulatory
safeguards, there is a strong case for exploring how CDC–style solutions could be made available within the
retail market. Given the scale of the retirement income challenge facing millions of DC savers, policy should
seek to expand, rather than constrain, access to well–designed collective solutions.
Improving access to guidance & assistance
3.118. The FCA Financial Lives survey shows that only 8.6% of UK consumers received regulated financial advice
in 2024, 8.3% in 202218.
3.119. Furthermore, according to the FCA, 75% of consumers, aged over 45, do not have a clear plan for how to
take money from their pension or did not know they had to make a choice19.
3.120. The above is particularly worrying given access to high–quality guidance and advice can play a critical role in
improving retirement outcomes, helping individuals select appropriate retirement income strategies, avoid
unnecessary tax liabilities, manage longevity risk and make more informed use of the options available to
them.
3.121. Existing mechanisms, including adviser charging and the Pensions Advice Allowance, already enable some
individuals to use pension assets to pay for regulated financial advice. However, aside from the question as
to member awareness, their scope and practical application remain relatively limited and may not adequately
reflect the range of support individuals need as they approach retirement.
3.122. The Commission should therefore consider whether these arrangements could be made more flexible,
enabling pension savings to be used more easily to fund appropriate support across the spectrum, from
targeted guidance through to comprehensive regulated advice. Any such reforms should reflect the realistic
costs of different forms of support and be accompanied by appropriate consumer protections and quality
standards.
3.123. There may also be merit in reviewing the scope and delivery of publicly funded guidance services such as
MoneyHelper and Pension Wise. While these services provide an important foundation of support, more
personalised and practical guidance could help individuals better understand how the various retirement
income options may apply to their own circumstances and identify when regulated financial advice would be
beneficial. Given the government’s interest in promoting financial resilience in later life and reducing future
reliance on means–tested state benefits, there is a strong case for ensuring that individuals are equipped to
make well–informed decisions about how best to use their pension savings to support sustainable retirement
incomes.
3.124. Given the scale of the decisions involved and the potential cost of poor outcomes, spending a modest
amount of pension savings on obtaining appropriate guidance or advice will often represent one of the
highest–return investments a saver can make. A relatively small investment in better decision–making at the
point of retirement has the potential to deliver substantially improved financial outcomes over the course of
retirement while reducing the risk of avoidable detriment.
18 Key findings from the FCA’s Financial Lives May 2024 survey, May 2024:
https://www.fca.org.uk/publication/financial–lives/financial–lives–survey–2024–key–findings.pdf
19 Millions of people could get more support with their pensions under new proposals, FCA, 12 December 2024:
https://www.fca.org.uk/news/press–releases/millions–people–could–get–more–support–their–pensions–under–new–proposals
4. About The Society of Pension Professionals
4.1. The SPP is the representative body for a wide range of providers of advice and services to pension schemes,
trustees, and employers. Our work harnesses the expertise of our membership, striving for a positive impact
on pension scheme members, the pensions industry, and its stakeholders.
4.2. The breadth of our members is a unique strength for the SPP. Our membership of 90 corporate organisations
employs over 20,000 pension professionals including actuaries, lawyers, professional trustees, DC
consultants, investment managers, providers, administrators, covenant assessors, and other pension
specialists.
5. Further information
5.1. For more information about this SPP response please contact SPP Director of Policy & PR at: phil.hall@the–
spp.co.uk or telephone the SPP on 0207 353 1688.
5.2. To find out more about the SPP please visit the SPP web site: https://the–spp.co.uk/
5.3. Connect with us on LinkedIn at: https://www.linkedin.com/company/the–society–of–pension–professionals/
5.4. Follow us on X (Twitter) at: https://twitter.com/thespp1
08 July 2026
The SPP deserves credit for confronting the uncomfortable reality that minimum AE contributions are simply not enough. If we want materially better retirement incomes for future generations, higher contribution rates are unavoidable. Their recommendation to increase contributions is a major part of the solution for those with 20–40 years ahead of them, allowing compounding to do its work. They are also right to advocate phasing in higher contribution rates over time to avoid unnecessary shocks for employers and employees alike.
For those much closer to retirement, however, the picture is different. There is simply less time for higher contributions to make a material difference. Here, the SPP’s support for CDC is particularly welcome. By pooling longevity risk and providing a more efficient way of converting accumulated savings into lifetime retirement income, CDC offers a structurally stronger decumulation pathway that can help improve outcomes for many of those approaching retirement, regardless of how their pension pots were accumulated.
“If we want materially better retirement incomes for future generations”
Who’s “we”? The question is whether The Young want part of their income diverted to pensions when they might prefer to spend it on, say, housing or holidays. Are they moral agents or aren’t they? if they aren’t, scrap universal franchise democracy and let the credentialed elite rule as a dictatorship.
I hope you can infer the sneer intended in the use of “elite”.