Pension adequacy delay is not a time to despair.

The government’s announcement to delay work on part 2 of their pension review to discuss adequacy of the pensions system has been met with near universal dismay.

But should this be case? ?

For starters, it should be noted that I share the view that the pensions system is failing in the private sector. The end of defined benefit (DB) pension provision means that a growing cohort of people will be relying on purely defined contribution (DC) pots to fund their retirement.

This is inevitably going to put a strain on people’s ability to retire with comfort as more generous schemes drop out of the system. As a result, it is highly likely that pensioner poverty will rise in future generations compared to the golden age of retirement that our parents and grandparents are living in.

A key part of solving the adequacy problem is increasing contributions. However, doing this in a responsible way bearing in mind the growing financial strains on UK businesses is politically hard to navigate and almost certainly lies behind the delay in the latest pension review. However, that’s predicated on the assumption that most seem to have that adequacy equals higher contributions.

Individuals can, of course, pay more and for some readers this may well be an option and one which they should sincerely consider. However, for many others struggling with their finances, sluggish wage growth and the cost of living this is unaffordable and unconscionable. ?Not everybody has the means to save more for a retirement that could be decades away when families are struggling to get by in the here and now.

This means that a review of adequacy the pensions system cannot just dictates that we need more contributions and create a timetable from late 2020’s to increase contributions by (say) 0.75% a year for 6 years to slowly ramp up the savings.

It is an overly simplistic approach that risks alienating businesses, scaring savers and ignores a multitude of other factors that make up ‘adequacy’ when it comes to later life savings.

A review needs to properly consider a number of items simultaneously.

Firstly, it must answer some key questions about the state pension.

Is it sustainable in its current form and how can State Pension Age be fairly raised without beginning to impact on people’s healthy lives?

Does the State Pension properly interact with those moving from working age benefits (which seem to have barely any inter-relationship and often act as a cliff edge) into State Pension Age benefits which can be more generous?

Do we need to consider disability benefits as a bridge to retirement for those unable to work in their usual employment?

Secondly, while auto-enrolment is often held up as a major success, it still contains some fundamental issues at its heart.

If we see that c.10 million workers are auto enrolled, then that still leaves c.10 million employed people who are not. Who are these people? Should we be worried about them? Low earners, multiple job holders, self-employed. Of the 10 million that are enrolled, is being in a pension scheme and ending up with a fund of ￡20,000 really worthwhile?

Should pension saving be seen as the only game in town for lower and median income workers or is this a wasted exercise when actually they would benefit far more from savings to help them now while they’re working to reduce reliance on debt and even other in-work state benefits.

Auto-enrolment may well have been great news for the pensions industry but is unclear whether it is going to be good news for society.

Thirdly and finally, we must tackle tax incentives. I have long been against a flat rate tax relief for all pension savings, mainly because of inter-generational unfairness. Those who have gone before having benefited from this tax break and it feels like a pulling up of the drawbridge. However, the boost from government to 20% taxpayers for a 30% tax break would be a massive benefit to those saving. Perhaps that 10% could be put to good use in other ways.

As to next steps, I am convinced that the government has not given up on a pension review. We know the Work and Pensions Committee are doing some analysis on pensioner poverty and the results from that are going to be very interesting.

We know the government are going to push for quality in defined contribution schemes, are launching the pensions dashboards soon and beginning to resolve the small pots problem. These have all be major issues for the past 10 years and should be brought over the line.

The industry continues to raise ideas like PMI/Schroders Lifetime Savings Initiative which is interesting (I have some concerns with it) but more thinking like this is needed so that retirees of the future get some kind of retirement. Space precludes addressing the challenges of housing and long-term care, but all this is linked.

I am very hopeful that Emma Reynolds MP uses this period to engage with key pensions thinkers and refines her team's thinking and the key questions that must be addressed, some of which I’ve tried to sketch out here.

David Brooks, Head of Policy at Broadstone