Pensions: Low-income and Self-employed Workers

Viscount Younger of Leckie Excerpts

Wednesday 23rd July 2025 Lords Chamber

Asked by

[Viscount Younger of Leckie]

To ask His Majesty’s Government what steps they are taking to encourage greater pension saving, and to improve pension adequacy, particularly for low-income and self-employed workers.

[Baroness in Waiting/Government Whip (Baroness Anderson of Stoke-on-Trent) (Lab)]

My Lords, automatic enrolment has transformed workplace pension participation, with over 22 million employees participating in 2023. However, we know that many people are still not saving enough to enjoy a financially secure retirement. For some groups, particularly those not eligible for auto-enrolment, such as the self-employed, pension participation remains low. The newly announced Pensions Commission will explore wider steps to improve pension outcomes, especially for those at the greatest risk of undersaving, including low-income and self-employed workers.

[Viscount Younger of Leckie (Con)]

My Lords, we welcome the setting up of the commission under the chairmanship of the noble Baroness, Lady Drake. Making the case for saving for retirement is crucial, given that the DWP has highlighted that 15 million people are saving too little for retirement, which is about half the workforce. Currently, helped by extended auto-enrolment, 8% is put into pension pots, with 5% by the employee and 3% by the employer. Pensions experts think that the total, however it is split, should be at least 12%, but lower-paid workers, including the self-employed, earning between £10,000 and £20,000, if they are saving, are in effect saving on average only 5.5%. I am surprised that the commission is not reporting until 2027. Why is that? What can the Government do right now in the meantime, beyond auto-enrolment, to encourage greater savings for retirement?

[Baroness Anderson of Stoke-on-Trent (Lab)]

It is a delight to stand here and enjoy cross-party support for a new provision, and I thank the noble Viscount. On his point about the level of employer contribution, the Government have been clear that there will be no increase in the current rate in this Parliament, but the noble Viscount makes a genuine point about how we make sure that people have enough money in retirement. That is why we have established a new Pensions Commission to look at these issues in the round. The noble Viscount states that 18 months is a long time, but the last Pensions Commission took five years. We are talking about matters that will have an impact for decades to come, and so we need to make sure we have the right steps in the right place at the right time. Auto-enrolment was an incredibly important step that has nearly doubled the number of people saving. No pressure on my noble friend Lady Drake, but she now has a significant job to do to make sure we are fit for the future, so that future generations, including my own, have the right level of pension savings.