Industry organisations have welcomed plans for a major review of the UK pension system, raising concerns that savers could be "sleepwalking into the next pension crisis".

The Institute for Fiscal Studies (IFS) announced plans for a comprehensive pensions review today (20 April), in partnership with the Abrdn Financial Fairness Trust, after its report, Challenges for the UK pension system: the case for a pensions review, raised concerns around the "substantial risks" facing future generations.

The report was welcomed by industry experts, with People's Partnership director of policy, Phil Brown, suggesting that the review has the potential to help build the consensus needed to reform the UK pension system.

“This research adds to the growing body of evidence showing that the majority of British workers are under saving for retirement. What’s currently missing is a societal consensus on how we reverse that trend," he stated.

“We hope that the IFS’s review will help chart the path towards improving the nation’s financial resilience.”

This was echoed by Phoenix Insights director, Catherine Foot, who argued that it is "vital" that the retirement income prospects of future generations are taken seriously, warning that policy decisions are needed soon.

"Gen X are the next generation fast approaching retirement and are typically characterised by lower levels of home ownership and lower rates of final salary pensions than the Baby Boomers preceding them," she continued.

"This “forgotten generation” also won’t benefit for a lifetime of saving under auto enrolment, leaving many at risk of running out of money in retirement at current saving levels.

“The UK is continuing to sleepwalk into the next pension crisis, with widespread under saving among those in the mid stages of their life. We have less than 10 years before this really starts to bite, so we need to make the right policy decisions soon to improve the prospects of retirement living standards."

Barnett Waddingham self-invested pensions technical specialist, James Jones-Tinsley, agreed, warning that "we are sleepwalking into a retirement crisis; significant policy change is needed, and quickly.”

AJ Bell head of retirement policy, Tom Selby, also agreed that an assessment of how the UK retirement system is "long overdue", pointing out that the Lord Turner's Pension Commission's final report was published 17 years ago.

He added: "The original Turner Commission report was the catalyst for automatic enrolment, a reform built around cross-party consensus that has helped introduce millions of people to retirement saving for the first time.

“While auto-enrolment is not perfect – in particular the issue of pensions adequacy and how to scale up contributions needs to be addressed – it has stood the test of time in large part because politicians broadly agreed it was necessary to begin addressing chronically low retirement savings levels in the UK.

“We now need a similarly consensual approach to be taken on the issue of pensions taxation and wider retirement savings policy.

"Overwhelming complexity and having to deal with constantly moving goalposts undermines confidence in pensions and risks putting people off engaging altogether – and yet that is exactly what we’ve seen in policymaking since Turner."

Selby pointed to the recent changes to pension taxation as demonstration of this, highlighting Labour's pledge to reverse the government’s decision to remove the lifetime allowance as a "microcosm of the problem a lack of consensus on pensions taxation creates".

"This IFS review could potentially form the basis for a more sensible, long-term approach to pensions taxation, with the aim of making the rules easier to understand and encouraging more people to save for their financial future," he stated.

Hymans Roberston senior DC consultant, Hannah English, also emphasised the need for government support, arguing that this will be "crucial" for the effective implementation of any future policy change.

"Whilst it is encouraging that there’s a clear timeframe to deliver policy recommendations by September 2025, it would be good to see early engagement with, and support from, the government to complete the review," she continued.

"We note that the government alone will not be able to force all improvements in member outcomes through policy change.

"Engagement with providers to drive product innovation, employers to review scheme delivery, and regulators to provide guidance will also be needed to improve the outcomes of future pensioners.”

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