Pension Schemes Bill

Lord Sharkey Excerpts

Thursday 5th February 2026 Grand Committee

[Viscount Younger of Leckie (Con)]

My Lords, Amendment 205 in my name would require the Government to review levels of pension awareness among young people and to consider how existing policy might better support earlier engagement with pension saving. Members of the Committee will have noticed that I have included certain steers as to what the review should focus on; I hope that this brief debate will enable Members to agree largely with what we are trying to do here.

For many people in their 20s and 30s, pension saving is driven almost entirely by automatic enrolment. In one respect, this is a success story: it clearly illustrates the impact that automatic enrolment has had, with around 71% of young people in full-time employment now contributing to a pension and often benefiting from employer contributions, tax efficiency and the long-term advantages of compounding. Of course, there are opt-outs, but I am pleased to say—I hope that the Minister will confirm this—that opt-out rates remain relatively low.

Progress is, therefore, welcome. However, it still leaves nearly one-third of young people not saving at all. Starting to contribute at a younger age makes an enormous difference. Compound interest, where returns build, not only on contributions but on previous returns, means that early saving is particularly powerful. Small amounts saved early can matter more than much larger sums saved later.

Yet, the reality facing young people is difficult. Surveys consistently show that younger generations face an uphill financial struggle. For many, and I remember how I felt in my early 20s, retirement feels distant and abstract, something to worry about later, rather than now. Unsurprisingly, confidence among those aged 25 to 44 about their later life savings is among the lowest of any age.

We need to understand why this is the case. It is not enough for policy bodies to list familiar explanations, such as behavioural bias, lack of knowledge or low trust, and then publish discussion papers. The Government need to know in detail what is actually preventing young people engaging with pensions. If automatic enrolment is still leaving out around one-third of eligible workers, more work clearly needs to be done. As with most things in pensions policy, the answer will be complicated, but complexity is not an excuse for inaction.

We should be clear that automatic enrolment alone is not sufficient to deliver an adequate income in retirement. Of course, I am very aware that the pensions review will be looking at this as its stage 2 focus, and I will talk more about that later. Will the pensions review properly examine these barriers to saving among the young? If not, why not? I ask the Government to give a response on this.

Young people are often focused on more immediate priorities: for example, saving for a house deposit, building an emergency fund or paying off student loans understandably come first and spring to mind; pensions, as I said earlier, are seen as something for later life. But time does not pause and there are real benefits to saving early. Early contributions help smooth out market volatility and allow savers to benefit fully from compounding over decades. Most young people will be in defined contribution schemes, where these effects matter greatly.

There is also a deeper issue of confidence. Nearly half of Gen Z believe that the state pension will not exist by the time they retire. This is a generation shaped by repeated economic shocks, from the financial crisis to the pandemic and the cost of living crisis triggered by the war in Europe. For them, pensions can feel less like a promise and more like a relic. The question is, what do we do about it? I am disappointed, as I said earlier, that pension adequacy appears only in the second stage of the review. In my view, and many people’s views, this should be a priority. Your Lordships should be asking whether lowering the automatic enrolment age, removing the lower qualifying earnings band or increasing minimum contribution rates would deliver better outcomes.

We should be asking what more can be done to reduce the barriers that discourage young people from saving at all. This is why the amendment seeks to require the Government to move faster to review pension awareness among young people and how existing policy would better support early engagement—that is, to move now and not wait until stage 2.

Finally, reverting to the barriers that I alluded to, I will make one final point, which is on the question of compulsion—just to get my oar in on this before the end of today’s proceedings. Mandation, or even the threat of it, will fall most heavily on younger savers, a point made powerfully by my noble friend Lord Fuller earlier in the week. It risks burdening a generation who are 30 or 40 years away from retirement and who already face significant disadvantage within the system. There is already generational unfairness in pensions policy and we believe that mandation would only entrench this. It should have no place in the Bill, but we have rehearsed those arguments before. Without further ado, I beg to move.

[Lord Sharkey (LD)]

My Lords, I will speak briefly but enthusiastically in support of Amendment 205. The case for a review was eloquently put by the noble Viscount, Lord Younger, and its merits are surely obvious. I hope the Minister will be able to agree with that.

In particular, I hope the review will take a close look at the situation that many Gen Z people find themselves in. Many work in the gig economy or are self-employed. The Gen Z average savings are small: 57% have pots smaller than £1,000 according to PPI data, and half of them cannot estimate their pots in any case. Perhaps alarmingly, 45% of Gen Z people rely heavily on social media for financial information—presumably delivered by animated cats. The proposed review could and should examine this in much more detail.

[Baroness Neville-Rolfe (Con)]

My Lords, I support my noble friend Lord Younger of Leckie in proposing a review of pension awareness and saving among young people.

When I had the honour to review the state pension age for the DWP in 2021-22, I was struck by two things that strengthened the case for better policy in this area. First, I found it much more difficult to get young people or their representatives, or indeed middle career workers, to engage in my review. Those who did were keen to keep pension contributions down and they did not believe the state pension would still be universal by the time they reached the retirement age of, say, 70. They were worried about buying a flat, as my noble friend has said, looking after their children and paying back their student loans.

Secondly, the level of financial education was dire. Schools were focusing well on human rights, the environment and ESG, which was discussed under the previous amendment, but not on pensions or financial management. They were not teaching the importance of early saving, the magical impact of compound interest, the value of a pension matched by the employer and the risk of new sources of profit like cryptocurrencies. Much more such education is needed in our schools but the Department of Education was resistant, partly because teachers are also often a little short on financial education. This is an important area and I am sure the Pensions Commission will look at it, but my noble friend is right to highlight what a big job we have to do.