The Department for Work and Pensions (DWP) has confirmed a £29,000 boost for state pensioners to help 15 million people avoid a retirement cliff-edge. Without new rules from the Labour government, this figure is projected to climb to 19 million.
Warning for Millions of Pensioners
A warning has been issued that 15 million state pensioners will have to work longer under a cliff-edge scenario. The Pensions Commission's interim report highlights that currently, 15 million people are under-saving for retirement, a number that could reach 19 million without action, leaving many facing a severe cliff-edge upon retirement.
The report states: "The forces reshaping our society – longer retirements, slower growth, and falling home ownership – demand a renewed national settlement on pensions."
New Pension Schemes Act
To combat this, the Pension Schemes Act, passed this month, will benefit 22 million workers by up to £29,000 by the time they retire. This will drive down costs, boost returns, and enable the automatic consolidation of small pension pots to ensure every pound saved works harder for working people, according to the DWP.
The report continues: "The share of our population over the age of 65 is projected to reach 28% by 2075, up from 19% today. The number of people aged 75 or over is projected to double between 2025 and 2075: a rise of six million."
State Pension Age and Dependency Ratio
State pension age increases and slowing life expectancy increases have kept down the old-age dependency ratio during the past 20 years. However, over the next decade, it is expected to reach three pensioners for every 10 working-age adults, and four for every 10 by the 2070s.
The report adds: "Spending on pensioner benefits (including the state pension) is projected to grow from around 6% of GDP in 2024-25 to around 9% by the early 2070s."
Pensions Commissioner's Statement
Pensions Commissioner Baroness Jeannie Drake said: "Over the past two decades since the Turner Commission, there is no doubt pensions reform can be described as a success. Yet the second Pensions Commission is looking forward and seeing many people not saving enough and millions not saving at all. This demands a renewed national settlement on pensions. Achieving this will require clarity of purpose, but it also offers a moment of opportunity; to renew a social contract that commands confidence across the country. The recommendations we present in our final report will address the need to secure adequate income in later life and a pension system that is fit for decades to come."
Minister's Response
Labour Party Minister for Pensions Torsten Bell MP said: "Britain has got back into the pension saving habit, but the job is only half done with tomorrow's pensioners still on track to be poorer than today's. The Pensions Commission sets out clearly the scale of the challenge: not enough people are saving for retirement, and many of those that are aren't saving enough. The Commission warns that without action, millions more people could be at risk of becoming reliant on state support in retirement."
