The pensions minister wants to look at the gender pensions gap in part two of her pensions review and is interested in creating flexibility in the pension system for those on lower incomes, including through ‘sidecar’ savings accounts. In the context of the review, she is also “looking closely” at implementing the auto-enrolment reforms legislated for last year. 

The pensions review started this month with a call for evidence that closes on 25 September. Pensions minister Emma Reynolds apologised for the short timelines, saying: “We're in a bit of a rush and I urge everyone to have their say now and make sure their voice is heard.”  

An interim report will be produced in the autumn, followed by a final report next year, she said speaking at a launch event for two new pension reports by the Institute for Fiscal Studies, held in London this week.  

Among others, Reynolds plans to consider the gender pensions gap in the second phase – which will consider outcomes and adequacy – of the pensions review she is leading.

Tackling the gender pensions gap is a problem successive ministers have shied away from, and only last year was it even officially quantified, when the Department for Work and Pensions found a 35% gap between the private pensions of women and men. 
 

 

The current lower levels of pension wealth among women is something the new pensions minister wants to examine in her pensions review.

“In the second stage, I would like to look at that,” she said. "I'm very concerned, and so is the secretary of state [Liz Kendall], about the gap of pensions for women and pensions for men." 

The issue is rooted not only in career breaks, but also the gender pay gap, she argued. “So even if you covered the career break, if you didn't tackle the underlying issue, you'd still have the same outcome,” she said. “I'm very much interested in that issue. I'm a feminist, so I'd like to see women do just as well as men.” 

Who is saving how much is likely to be explored more generally in the review. As well as the gender pensions gap, Reynolds mentioned the “concerning statistics” about the lower participation rates of some ethnic groups. 

Challenges like lower earnings growth and lower asset returns compared with 20 years ago add to the need to think about adequacy. Greater competition among pension schemes on returns rather than cost is one of the goals of the new government, according to the minister.

The last government sought to improve adequacy by bringing in reforms to auto-enrolment recommended back in 2017. The secretary of state was given powers to implement these changes through legislation that was passed last year, but regulations have not been made yet.

Reynolds said: “I'm looking closely at future implementation in the context of the pensions review.”  

Reynolds said she is also interested in the debate around flexibility for those on low incomes, which was a key focus of the research and policy proposals made by the IFS.

The institute suggested that increasing contributions across the income spectrum would negatively impact those on lower earnings, and instead proposed keeping up employer contributions on opt-out and introducing an earnings threshold above which contributions rise from 8% to 12%. 
 

 

The minister said while she would prefer everyone to have higher incomes, one had to work with reality – suggesting those on low incomes could be nudged into saving into a cash account.  

“I'm very interested in the sidecars model because, as I said in my speech, I think there is a trade-off here,” between living standards in retirement and today.  

“In an ideal world, everybody would save for their pension, but obviously people on really low incomes are going to struggle to do that and also get by,” she said. “I think the sidecar option is one that I want to explore and look into in more detail, but I think it could be a really good solution for those people on low incomes.”  

Pension savings rates among the self-employed could be boosted through self-assessment tax returns, according to the IFS. It is an idea that has been discussed in pensions policy circles for some time, although it is unclear whether HM Revenue & Customs is equally interested.   
 

 

Reynolds said: “On the self-employed, my department continues to build the evidence base with HMRC and Nest Insight to further test the capacity of nudges... whether they work or not, and defaults within payroll software to enable self-employed people to save.”  

The DWP more recently started work with Nest Insight and the Business Application Software Developers Association to explore options on retirement savings solutions, she added.