Industry experts have stressed the need for the government to agree an income replacement target to help inform state pension and private pension policy, in new evidence for the Work and Pensions Committee's (WPC) inquiry into pensioner poverty.

The WPC launched an inquiry into pensioner poverty at the end of 2024, after Secretary of State for Work and Pensions, Liz Kendall's first appearance in front of the committee, when she suggested that the second phase of the pensions review, which has since been delayed, would “be looking at future outcomes, including pension adequacy”.

In its first evidence hearing for the inquiry, the committee asked industry experts whether the focus for state pension policy should be on sustainability or adequacy, and whether recent governments have been able to lay out a clear vision for what they are trying to achieve with the state pension.

In his response, Institute for Fiscal Studies (IFS) deputy director, Carl Emmerson, stressed that whilst "it is pretty clear that people will disagree about what the right level should be", there is a "nice simplicity" about the flat rate state pension in the UK.

"It means we just have to make decisions about what level that should be set at and what age it should come in," he stated. "Obviously, the age has been rising, with the state pension age increasing, and that is a coherent response when people are living longer, at older ages. It is one way of managing sustainability."

But Emmerson suggested that, rather than the triple lock, a better system would be to set a target for what the state pension should be and a pathway to get to that target, warning that the triple lock will not deliver increases in the state pension relative to average earnings, if we get a stable growing economy again."

But this target is needed sooner rather than later, as independent research consultant, Daniela Silcock, warned that without a clear and agreed target income, deciding on state pension policy, and by extension private pension policy, can be "very difficult".

She stated: "The government has said in a few different publications that they are looking for the state pension to provide 30 per cent. There is also discussion about total income and having the state pension provide 40 per cent of total income and private pensions 60 per cent. We are nowhere near a level where that is going to happen.

"If we are developing a target, it is really important that we are clear about how we are making that calculation. It is extra concerning that the pension review into adequacy has been delayed, because we do not have an established target at the moment.

"We need to figure out what we are aiming for and how to get there, and set a target and then aim for that.

"Without that, it is very difficult to do state pension policy; it is very difficult to do private pension policy. How can we make a decision about whether or not to maintain the triple lock when we do not know what we are aiming for?

However, Silcock warned that it could be "dangerous" to remove the triple lock without a target already established, as it would be unlikely to be reinstated.

"I think the real key is to have a target for where we want it to be and not get rid of the triple lock until we have decided what the target is, because if you then determine a target it will be harder to reinstate it," she stated.

"I know this would be technically difficult, but is a percentage of median income a good target? We can see that fewer pensioners are in poverty, but more pensioners are in material deprivation, so this is not just about income compared to income. It is actually about what pensioners can afford.

"Should we aim for something like the minimum income standard for state pension, which is a standard developed to see what can pensioners afford, and can they afford to meet basic needs to have a decent standard of living?"

Silcock said that the delay to the second phase of the government's pension review was particularly concerning given the lack of an established target at the moment.

"We need to have the adequacy review and then decide how to deal with it. You cannot really set policy without it," she stated.

Centre for Ageing Better CEO, Carole Easton, echoed this, arguing that, as well as not delaying the adequacy delay, the government should consider delaying any major decisions about pension age and pension entitlement until there is a very thorough review of the implications of doing so.

"When the pension age went up by one year a little while ago, we saw roughly 100,000 more people pushed into poverty, so we know the risk is high of making changes without due consideration," she stated.

"I would like to suggest a thorough review of anything pension-related—the mechanism and the targets, and also the benefits associated with both pre-retirement and post-retirement."

Emmerson also expressed disappointment over the delay to the second phase of the review, arguing that "a pensions review is overdue and needed".

"Labour was right to put in its manifesto that it was going to do one," he stated. The Pensions Commission did a great job, but that was 20 years ago and much has changed since then in both the policy environment and the economic environment.

"There is much to learn about how automatic enrolment has gone and how the state pension age increases have gone.[A review] should happen [this] year, and I still hope that it will—indeed, that is why IFS has been trying to do its own one for the last couple of years."

The committee also heard concerns around the winter fuel payment changes, as Silcock argued that this "seems like a blunt approach".

"I know Age UK says that the winter fuel payment has a big difference in keeping pensioners out of poverty, so if we need to look at the winter fuel payment, maybe we can look at doing it in a way that is not so blunt," she stated.

Easton agreed, arguing that "it is too quick too soon" and should be reviewed again.

"Again, it is a sticking plaster for our poor-quality housing crisis," she stated. "You could save £200 easily if people’s homes were improved and a joined-up approach could be a different way of addressing the issue."

Indeed, Easton argued more broadly that it is "about looking at people in the round", and considering housing and health services alongside pensions.

“There is a lot that could be done to reduce costs," she continued. "If people’s homes were
improved, for example, that would improve their health and their quality of life. It is one of the reasons why we have been pushing for a joined-up strategy on ageing.

"So I would love to see not only a delay in the pension changes until we have done a more thorough review of everything related, but also an ageing strategy where all the aspects of later life are addressed. A commissioner could oversee that and join departments up, because it is to the mutual benefit of different departments."

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