The Institute for Fiscal Studies (IFS) has announced plans for a comprehensive pensions review, in partnership with the Abrdn Financial Fairness Trust, after its research raised concerns around the "substantial risks" facing future generations of pensioners.

The multi-year review will look to examine the effects of changing economic conditions and public policies on the future of financial security in retirement, including how these effects differ by gender, ethnicity and across the UK.

It will be led by three IFS directors, Jonathan Cribb, Carl Emmerson and Paul Johnson, with a series of reports to be shared over the next two years, before the main phase of the review concludes in Summer 2025 with the group's concrete recommendations and options for reform.

The review will also receive input from a steering group, with members including former Chancellor of the Exchequer, Alistair Darling, former Secretary of State for Work and Pensions, David Guake, and former Pensions and Lifetime Savings Association (PLSA) chief executive, Joanne Segars.

Plans for the review were announced following concerns that recent policy successes could have "blinded" policymakers and industry to the risk that future generations will not fare as well, with concerns that too many are saving too little for retirement.

Indeed, the research from the IFS revealed that 60 per cent of middle-earning private sector employees who are contributing to a pension are saving less than 8 per cent of their earnings, and nearly 90 per cent are saving less than the 15 per cent of earnings previously recommended by Lord Turner’s Pensions Commission.

In addition to this, the IFS noted that almost all of this saving is coming in the form of defined contribution pensions, which leave individuals, rather than their employers, exposed to risks that may be difficult to manage well.

The IFS warned that those retiring with DC pots face considerable difficulty and risk in managing their finances through retirement, with risks around running out of private resources or savers being so cautious that they have a needlessly austere retirement.

The IFS also pointed out that an increasing number of those approaching retirement live in more expensive, insecure, private rented accommodation, warning that this could lead to a combination of a disappointingly low standard of living in retirement and/or greater reliance on housing benefit.

The review will also consider the impact of changing demographics and longevity trends, as the IFS noted that whilst higher state pension ages are a coherent response to the challenges of increased longevity at older ages, they pose difficulties for many.

The report also clarified that longevity improvements have not been as big as predicted a decade ago, warning that the higher the state pension ages rise, the harder it will be for some to remain in paid work until that age.

Specific concerns were also raised in relation to self-employed workers, as the IFS revealed that fewer than one-in-five of the growing number of self-employed workers are saving in a pension, compared to around a third when the Pensions Commission reported.

Given these concerns, IFS director, Paul Johnson, emphasised that "a fresh look at the UK retirement saving environment is long overdue".

He continued: "The last decade or so has seen state and private pensions deliver much better outcomes for many pensioners. But there is a risk this has bred complacency among policymakers.

“Automatic enrolment has brought millions into workplace pensions, but all too often at much lower rates of saving than the Pensions Commission thought would be needed. Despite the number of self-employed people growing considerably, many fewer of them are saving in a pension."

Adding to this, Pensions Review steering group member and Abrdn financial fairness trust chair, Alistair Darling, added: “Twenty years ago we set up the Pensions Commission which laid out a range of important reforms including auto enrolment. But today much has changed and the landscape is very different. Too many are saving too little for retirement.

“Many self-employed and those in insecure work don’t have a pension. Increasing numbers are living in the private rented sector, which will lead to higher housing costs in later life.

"Whilst today, many pensioners are doing well on average and pensioner poverty has been cut drastically, we need a major review to avoid a future where too many won’t have enough to live on in their old age.”

The Pensions Regulator (TPR) also welcomed the plans for the review, with TPR director of regulatory policy, analysis and advice, Louise Davey, stating: “More people are saving into workplace pensions than ever before.

“However, as this important report points out, there’s work to do to ensure people save enough for retirement and savers are supported to make good decisions about their pension savings.

“Our focus continues to be on promoting a well-functioning system which delivers value for savers, and we look forward to supporting the development of any industry-led solutions that help ensure people have financial security in retirement.”

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