Pensions: a vision for the future

Think tank: Social Market Foundation

Author(s): Michael Johnson

June 10, 2024

This report from UK think tank the Social Market Foundation proposes a vision for a simpler, fairer and more sustainable pensions landscape.

The pensions landscape is complex and unsustainable in its current form.

This Social Market Foundation report proposes a vision for a simpler, fairer and more sustainable pensions landscape, incorporating the three pillars of State Pension, workplace provision and personal provision into a holistic framework.

The paper’s proposed framework rests on key principles for pensions reform. The pensions system should be designed to ensure a dignified retirement for all and be fair, simple, and transparent. State provision should be long-term financially sustainable, reflecting the costs associated with rising life expectancy and the economic consequences of an ageing population, while providers of savings products should be consumer-focused. State, workplace and private sources of retirement income should be considered as a single framework, and policy should be made systematically, not piecemeal.

Based on these principles, the paper recommends introducing a larger, but later, Senior Citizens’ Pension, supplemented by Universal Credit and extended beyond state pension age. Defined contribution pots should be drawn down automatically by between 4%-6% by default over 15 years from ages 60 to 75, at which point residual pots should be annuitized to protect individuals against the risks of longevity and exposure to market risks.

Bonuses should be paid rather than tax relief on all contributions to pension pots, to help generate a broad-based savings culture, while auto-enrolment should be enhanced to give members of workplace pension schemes the right to choose the scheme into which their contributions are paid.