Who Saves for Retirement?

However, despite the emphasis on incentives, there has long been a concern that people fail to save enough for their retirement. The Pensions Commission, appointed in 2002 and led by Lord Turner, charted the decline of private pension provision and warned that unless reforms were made, many people would face inadequate pensions in retirement (Pensions Commission 2004, 2005). Following the Pension Commission?s recommendations, the Pensions Act 2008 introduced a set of reforms that seek to address the problem of pension under-saving. The core tenets of these reforms are:

• A duty on employers (with some exceptions) to offer a good quality workplace pension scheme, with employer contributions;

• A duty on employers to automatically enrol employees into workplace pension schemes in order to overcome behavioural barriers to pension saving;

• The introduction of the National Employment Savings Trust (NEST) to provide a workplace pension scheme among employers not currently making provision, particularly targeted at low to moderate income employees.

Taking account of these reforms, the current UK pensions policy framework is therefore built around three core 'hypotheses' as to the factors - and policy interventions - that facilitate pension saving:

• Access to pension saving in the workplace;

• Financial incentives in the form of tax-relief and employer contributions;

• A choice framework that overcomes behavioural barriers to pension saving.

However, even while pension policy prioritises these three factors as key to pension saving, there is limited evidence regarding whether these reforms to pension policy will be effective in raising rates of pension saving. Indeed, it may turn out that incentives, universal access to a decent workplace pension and an improved choice framework prove to be necessary - but not sufficient - conditions to raising rates of pension saving, and the overall impact of these far-reaching reforms will be limited.