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The First Report of the UK independent Pensions Commission

By Paul Cummins FCCA AITI MSc.Multimedia Systems

3 November 2004

 The First Report of the UK independent Pensions Commission published in October 2004 presents the Commission's conclusions on the adequacy of pension provision and saving in the UK . It sets out the major challenges society faces and the unavoidable choices which need to be made.

The report, entitled ‘Pensions: Challenges and Choices,' is deliberately detailed and wide-ranging, examining all the different elements of the pensions system. Pension policy has too often in the past been designed piecemeal: the report argues that the UK needs a comprehensive approach which can be sustained over the long-term.

Adair Turner, Chairman of the Commission, said:

“Society and individuals face a huge challenge, but one that can be overcome. Longer lives and low birth rates will change dramatically the ratio of older to younger people. Major adjustments to average retirement ages and to pension provision are required. Over nine million working people will face pensions they may consider inadequate, unless they save more or retire much later than their parents.

“The underlying problems have been getting worse for 20 years at least, but were masked by the temporary impact of the baby boom generation, by a failure to anticipate the scale of life expectancy increases and by the irrational equity market exuberance of the 1980s and 1990s.

“We must now make adjustments which we should ideally have begun 20 to 30 years ago. And to get policy right we need to look comprehensively at all aspects of the problem. Too often in the past, under successive governments, pension policy has addressed specific problems without a clear overall context. This has had unintended and adverse consequences.”

Some of the graphics on the website will assist in simplifying the concepts

The report explains that faced with the increasing proportion of the population aged over 65, society and individuals must choose some mix of four options. Either:


  • Pensioners becoming poorer relative to the rest of society; or
  • Taxes/National Insurance contributions devoted to pensions rising; or
  • Savings rising; or
  • Average retirement ages rising;

 The report argues that the option of poorer pensioners is the least attractive and that some combination of higher taxes/ National Insurance contributions, higher savings and/ or later average retirement age will be required.

It also argues that no single solution makes sense, and therefore does not present a figure for a ‘savings gap' but illustrates the trade-offs involved between different combinations of response.