Three out of four British workers are sleepwalking into a retirement crisis. That's the brutal verdict from a new report that will spook Downing Street. The Pensions Policy Institute has crunched the numbers. The outcome is grim. Only 25% of employees are on track for a 'moderate' retirement income. The rest? They are staring down the barrel of a significant shortfall.
This is not a fringe problem. It is a mainstream disaster. The report defines 'moderate' as £23,000 a year for a single person, a figure that stretches to £34,000 for a couple. Most people will not hit that. Auto-enrolment, the flagship policy of the coalition years, was supposed to fix this. It got people saving. But the saving rates are too low. The required minimum contributions are 8% of earnings. Experts say that needs to be at least 12% or even 15%. The Treasury has kicked this down the road. Again.
The politics are combustible. Labour has already signalled it wants to go further. Rachel Reeves, the shadow chancellor, has talked about a 'pensions adequacy review'. Inside the Treasury, officials are terrified of the cost. Mandatory higher contributions would hit employer payrolls and take-home pay. In a cost-of-living crisis, that is electoral poison. But doing nothing is a ticking time bomb. The Institute for Fiscal Studies has warned that younger generations risk being poorer in retirement than their parents. That is a Labour attack line waiting to happen.
Downing Street will, of course, point to the success of auto-enrolment. Nine million more people are saving. But the detail matters. The report shows that 60% of self-employed workers have no pension savings at all. That is a gaping hole in the system. The government's own review of auto-enrolment, due this year, is being watched closely. Insiders say it will recommend extending the scheme to the self-employed and lowering the age threshold to 18. But the big question of contribution rates will be kicked into the long grass.
There is a whiff of panic in the industry. Pension providers are lobbying hard. They want the government to set a clear timetable for raising minimum contributions. The Treasury is pushing back. 'We have to be mindful of the impact on business and households,' a source said. That is code for: we cannot afford the political backlash.
The report also exposes a deep regional divide. Workers in London and the South East are more likely to be on track for a moderate income. In the North East and Wales, the number plummets. The levelling up agenda is supposed to address these disparities. But without a radical overhaul of pension policy, it is a hollow promise.
So what happens next? The Treasury will commission further work. There will be a consultation. More delays. The pensions minister, Laura Trott, is seen as a safe pair of hands. She will try to steer a middle course. But the clock is ticking. Every year of inaction adds to the future bill. The state pension age is already rising to 67, then 68. That is a deferred crisis.
The real question is whether any party has the nerve to tell voters the truth: you need to save more, work longer, or both. That is a message that wins no friends. But the alternative is a generation of pensioner poverty. The report is a warning shot. Whether anyone in Westminster will hear it is another matter.
