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Open Letter

Government Pension Review Delay

We have written to the Chancellor to express our disappointment at the Government's decision to delay Phase 2 of the Pensions Review

Dear Chancellor,

We write to express our disappointment at the Government’s decision to delay Phase 2 of the Pensions Review. This decision represents a missed opportunity to address long-standing inequalities and inadequacies within the UK state and non-state pension system—issues that disproportionately affect women and lower-income groups, and which require urgent attention. As we outline in this letter, options for meaningful reform can be explored without placing the burden of the cost on businesses, making it both feasible and imperative to act now.

Women are particularly disadvantaged by the non-state pension provision system. They are overrepresented among low-income groups and are more likely to be excluded from automatic enrolment due to the earnings threshold. In 2024, the Pensions Policy Institute highlighted that 17% of women—compared to just 8% of men—do not meet the earnings criterion for automatic enrolment 1 . Moreover, women’s pension wealth remains over a third lower than men’s, reflecting persistent gender pay gaps, interrupted careers due to caring responsibilities, and the structural disadvantages inherent in defined contribution (DC) pension schemes.

The rising pensioner poverty rate—now at 16% of pensioner households, half of whom experience material deprivation—underscores the urgency of reform. Older women, particularly those who are single, are at greater risk of poverty, often relying entirely on the state pension and means-tested benefits. The triple lock has helped to increase average state pensions, but this has had little effect on the poorest pensioners, whose incomes grew by just 1% in 2010-2023 2 . This is the result of the triple-lock pension increases for those on low incomes being offset by a consequent loss of means-tested benefits, leaving overall incomes barely improved for those most in need.

While automatic enrolment has been a success in increasing participation in workplace pensions, it is clear that the current contribution rate of 8% is insufficient to deliver an adequate retirement income for many workers. Women, due to caring responsibilities and discrimination, will continue on average to have lower lifetime earnings than their male counterparts for many decades to come, increasing their financial dependency on their spouses’ decisions and the risk of poverty when widowed. Given that contributions from both employees and employers are determined by lifetime earnings, DC pensions in the UK reproduce gender inequalities in their outcomes. Since women are currently both paid less and tend to work shorter hours than men, men will continue to accumulate more contributions than women. In addition, the regressive system of tax relief on those contributions works to compound existing inequalities by disproportionately benefiting men, who tend to be higher earners.

The rationale for delaying the review—to avoid placing additional burdens on employers—overlooks solutions that do not increase costs for businesses. For instance, reallocating a portion of the £49 billion spent annually 3 on pension tax reliefs could fund carer credits within private pension schemes, ensuring that unpaid contributions to the economy are recognised and valued. Such measures would not only improve women’s pension outcomes but also incentivise a fairer distribution of unpaid care work between women and men.

The current system relies increasingly on DC pensions, and the impacts that this reliance will have on women throughout the life cycle are not well understood. We urge you to prioritise reinstating Phase 2 of the Pensions Review and to go beyond the original scope to conduct a thorough analysis of the system, adopting a comprehensive approach that considers workplace pensions and state pensions, as well as the adequacy of incomes for those already in retirement. It should aim to:

  1. Make changes to automatic enrolment to ensure fewer women are excluded.
  2. Address the regressive nature of pension tax reliefs and explore alternative uses of these funds to reduce pension inequality.
  3. Introduce mechanisms to recognise unpaid care work in pension entitlements, such as carer credits within private schemes.
  4. Ensure that sufficient state pension continues to be paid and is not dependent on top-ups means-tested on couples’ incomes.
  5. Analyse the impact of intersecting areas on pension inequality, including childcare, social care, housing, intra-household inequalities, paid and unpaid work, and climate change.

Failure to act now risks perpetuating systemic inequalities, leaving millions facing insecurity in later life. We urge the Government to prioritise Phase 2 of the Pensions Review and to uphold their commitment to addressing gender inequality and ensuring everyone can live with dignity in older age.

Yours sincerely,

Dr Mary-Ann Stephenson

Director, UK Women’s Budget Group

Read the letter