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      The Government has ‘revived’ the Turner Commission, whose recommendations resulted in the introduction of pension auto-enrolment in 2012. This was prompted by concerns with current pension savings rates, with retirees in 2050 on course to have 8 percent less private pension than today’s retirees, and 45 percent of working age adults saving nothing at all into a pension. The new Pensions Commission’s remit is to ‘examine the pension system as a whole and look at what is required to build a future-proof pensions system that is strong, fair and sustainable’.

      This article considers what measures the Pensions Commission might potentially propose, and suggests steps employers might consider taking now, pending publication of the Commission’s final report in 2027.

      Will Aitken
      Will Aitken

      Director and Head of DC Pensions and Financial Wellbeing

      KPMG in the UK

      What changes might the Pensions Commission consider?

      It would be wrong to think that the Commission’s topics and outcomes are already known. But a few issues seem more likely to come under consideration, having had some attention in recent years.

      These include recommendations from the Department for Work and Pensions’ Automatic enrolment review 2017: Maintaining the momentum, some of which already have enabling legislation in place.

      Recommendations from this review included lowering the age of auto-enrolment to 18 (from 22) and mandating pension contributions from £1 of earnings (the main argument against contributions from £1 was that these could lead to trivial pension pots, but the recent Pensions Bill is legislating to consolidate small pots, which might remove that potential barrier).

      Other issues that the new Pensions Commission might consider include:

      • Addressing the gender pensions gap;

      • Addressing lower rates of pensions savings among identifiable demographic groups.

      • Addressing the self-employed population and, more specifically, their typically lower levels of retirement pension savings; and

      • The State Pension – how people qualify, when it comes into payment, and how much it should be (which could, of course, have a significant impact on individuals’ private pension savings plans and, consequently, their expectations of pension provision by their employer).

      To add to these issues, we might also hope to see consideration of other forms of long-term saving, including home ownership.

      What’s the timeline for any reforms?

      The Pensions Minister, Torsten Bell, has ruled out any changes to pension auto-enrolment in the current Parliament. Therefore, it would seem likely that we are looking beyond 2030 for any implementation of the Commission’s recommendations. On the basis that there could be a change of Government, that could mean that in order to be successful, the Commission might need to find a political consensus for any change. (The previous Pension Commission reported in 2006, under a Labour government, and its recommendations were implemented in 2012, under a Conservative government.)

      What might employers consider doing now?

      It could be some years before the Pension Commission’s proposals are enacted as final reforms.

      However, there are some areas that employers might want to start thinking about now, particularly when making any changes to future spend on pensions and wider benefits. These include:

      • If the age for auto-enrolment were to be reduced from 22 to 18, what might it cost?
      • For employers that use Qualifying Earnings as pensionable salary, if pension contributions were to start from £1, rather than from £6,240, what might it cost?
      • Do you have populations where pension opt outs are higher than normal? Do any of those populations map to diversity networks? If so, you might want to speak to your networks about what might be behind employee decision making and how your benefit design might be amended to better suit a wider audience.
      • What support do you give employees when returning from parental leave in respect of pension contributions? What impact might that have on the gender pension gap and are any actions required?

      How KPMG can help

      KPMG has extensive experience assisting employers to understand the employment tax implications on employer pension schemes. We can provide guidance on how the various schemes work and explain which option may best align to your organisation’s requirements.

      We also have extensive experience around building employee total reward packages, and can provide guidance on the alternative options, including pension salary sacrifice arrangements, that can be used to ensure that you remain competitive in terms of the benefits and incentives you offer.

      Please contact the authors, or your usual KPMG in the UK contact, if you would like to discuss the potential impact of these prospective new measures on your business.

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