Reinvigorating Occupational Pensions: Workplace Retirement Income Commission Publishes Final Report

What? The Workplace Retirement Income Commission (the "Commission"), established to help the Government meet its commitment to "reinvigorate occupational pensions", has published its final report.

So what? Recognising the need for a shift from a society that "spends today and pays tomorrow" to one which saves for the long term, the report contains 16 recommendations designed to encourage retirement saving and restore trust and confidence in the UK pensions system.

The Commission's recommendations

State pensions

  1. The Commission welcomes proposals for a simpler, single-tier state pension and urges the Government to move quickly to put in place these new arrangements.


  2. From October 2012, new requirements will be introduced, which will mean that employers are required to automatically enrol eligible employees into a pension scheme that meets certain minimum standards. As part of this, employers will be required to ensure that a minimum contribution of 8 per cent is paid into the scheme on behalf of eligible employees (this must include an employer contribution of at least 3 per cent). However, the Commission believes that this minimum contribution will not be sufficient to meet expectations in retirement.

  3. Ahead of 2017, the Commission urges the Government to work with employers and the pensions industry to develop and encourage approaches that make it easier for people to save more, such as "auto-escalation" (an approach used in the US, which sees contribution rates rise automatically when an individual's salary rises or when they reach certain age thresholds).

    Risk management

  4. The Commission sees a strong case for exploring the wider use of risk sharing schemes and urges the Government to show leadership in encouraging and creating an environment in which employers can feel confident and rewarded for taking on risk. It also urges the financial services industry and Pensions Regulator to develop approaches that help to smooth investment volatility for savers.

    "At retirement market" and annuities

  5. Given the detrimental impact on the consumer, the Commission calls for further work to be done to understand why there is such a wide variation in price for the same type of annuity (i.e. a policy purchased from an insurance company under which the insurer agrees to pay a pension for life) and whether these variations can be justified.

  6. The report says that more could be done to ensure that individuals get the best deal when they buy an...

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