As 2022 draws to a close, it is fair to say it’s been a fairly turbulent year in UK politics.

The fallout of the upheaval – which has seen three prime minister’s in post – has been widespread. The pensions sector has not been immune, experiencing a fair share of volatility in recent months on top of the ongoing cost-of-living crisis.

Yet the sector as a whole still remains committed to ensuring savers are well placed to achieve a better income in retirement.

But that ambition cannot come without suitable reforms to the UK pensions system.

Without reform, more than 50% of savers will fail to meet the retirement income targets set by the 2005 Pensions Commission.

In the 10 years since auto-enrolment was first introduced, the unprecedented success of the policy has become clear. Saver numbers are up significantly to 19.4 million, opt-outs are lower than expected and evidence suggests people highly value pension savings and will continue to save in large numbers despite significant economic shocks, including the pandemic.

However, following research based on modelling by the Pensions Policy Institute (PPI), we find that, without reform, more than 50% of savers will fail to meet the retirement income targets set by the 2005 Pensions Commission.

This is true for people on average earnings, as well as for under-pensioned groups, such as those – often women – who take time out of work to care for others, and specific elements of the workforce such as the self-employed, gig-economy workers and people with part-time jobs.

The research also found that around a fifth of households are likely to achieve less income than needed to meet the minimum level of the independently assessed, Retirement Living Standards.

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It is why we published our report ‘Five steps to better pensions: Time for a new consensus’. In it we reviewed and assessed the current pensions framework and modelled the impact of a range of potential policy interventions, finding five key elements of reform needed to future-proof the system.

The first change needed is the creation of clear national objectives for the UK pension system that are ‘adequate, affordable and fair’. This, combined with regular formal monitoring of whether it is on track to achieve these goals, is key to future success for the sector.

The second is a reform of the state pension so everyone at least achieves the minimum Retirement Living Standard to prevent pensioner poverty.

We also believe reform is needed for auto-enrolment. We want to see more people reaping the benefits of saving into a workplace pension, including younger people, multiple job holders and gig-economy workers.

Also at a higher level, we want to see changes to ensure people on median earnings are likely to achieve the Pensions Commission’s target replacement rates. Measures we’ve recommended include saving from the first pound of earnings and gradually increasing contributions from 8% to 12% from the mid-2020s to the early 2030s, with contributions split evenly between employers and employees.

Another change we’d like to see is under-pensioned groups better supported. We believe additional policy interventions are needed to help women, gig-economy workers and the self-employed feel the full benefits of being in a workplace pension scheme.

Finally, we want to see more industry initiatives in place to help achieve better pensions. These could include actions to help people engage with pensions, receive higher contributions or get better outcomes.

There is already broad agreement that evolution of auto-enrolment is needed. With that in mind, these recommendations can help form a new consensus on how best to build upon a decade of success so everyone can achieve the right income in retirement.

While we accept that now – in the middle of a cost-of-living crisis – is not the right time for radical changes, it is still prudent to provide a roadmap for reforms that will help ensure better retirements.

Nigel Peaple is director, policy and advocacy, at PLSA