The Institute for Fiscal Studies (IFS) has issued a stark warning about the UK's private pension system, which it claims is failing millions of workers. A new report from the think-tank estimates that without significant reform, nearly 4 million people will face poverty in old age due to inadequate pension savings.
According to IFS data, the current defined benefit (DB) system disproportionately favours higher earners and those with longer tenure, leaving many low- and middle-income workers struggling to accumulate sufficient funds for retirement. In contrast, a shift towards defined contribution (DC) pensions would provide greater clarity and predictability for savers.
IFS Director Paul Johnson has stated that the aim is to create a more sustainable pension system that promotes work-life balance and addresses growing income inequality. He highlighted that the current DB system can be complex and unpredictable, with employer contributions often linked to company performance.
The IFS report's recommendations align with Labour Party proposals, which include introducing DC pensions and increasing the minimum pension age to 65. However, the Conservative Government has yet to respond to the report's findings, which come at a critical time as the UK's population ages and life expectancy increases.