From predictable pensions to personal responsibility: how retirement planning has transformed in 50 years

New report charts the evolution of the UK pension landscape and looks ahead to 2034

The Pensions Policy Institute (PPI) has released a comprehensive new report A 50-Year Retrospective, sponsored by Capita Pension Solutions as it marks its 50th anniversary.

The unique report highlights how economic, demographic, and technological changes have transformed pension schemes and retirement planning in the UK over the past five decades, and analyses how these factors have influenced the experiences of savers and those nearing retirement, using hypothetical households to bring these changes to life.

Looking ahead to 2034, the report identifies developments that will impact on people’s ability to achieve adequate retirement living standards, including increasing life expectancies, a workforce that will likely include greater proportions of women, older people, and flexible workers, as well as the likelihood of a generation of renting in retirement due to high house prices.

Shantel Okello, Policy Researcher, The Pensions Policy Institute said: “This retrospective not only reflects on the past but also poses crucial questions about the future of retirement. As we look ahead, addressing the challenges of balancing work and caregiving, improving contributions in pension savings, and ensuring adequate retirement income will become increasingly important. It’s essential that policymakers and industry leaders to engage in meaningful discussions and collaborate on solutions that ensure adequate later life outcomes for all.”

Anish Rav, Director of Pensions Policy & Proposition at Capita Pension Solutions, commented: “As we celebrate our 50th anniversary, it is fitting to reflect on the progress made by the pensions industry and to consider the challenges and opportunities that lie ahead. Understanding the evolving pensions landscape is essential for creating policies that improve retirement outcomes, and we hope that this report encourages those discussions.”

Key highlights from the report include:

• The shift from Defined Benefit to Defined Contribution schemes: In the past, Defined Benefit (DB) schemes provided a predictable income throughout retirement based on earnings and length of service. However, the shift towards Defined Contribution (DC) schemes means that individuals now bear more responsibility for their retirement savings, which requires savers to be more proactive in managing their pension pots and making informed investment decisions to ensure a comfortable retirement.
• Impact of legislative changes: Legislative changes, such as the introduction of automatic enrolment in 2012, have increased pension participation rates, bringing more people into pension saving. This is particularly beneficial for younger workers who might not have otherwise started saving for retirement. There are, however, ongoing challenges for example, around adequacy and gender wage disparities, which can negatively impact women's retirement savings.
• Rising house prices and homeownership challenges: For many in the UK the dream of homeownership has become increasingly difficult to achieve, leading to a higher likelihood of renting in retirement. This trend adds financial strain to pension savings, making it crucial for people to plan for higher living costs in their retirement years.
• Balancing Work and Caregiving Responsibilities: The evolving landscape of pension savings introduces new challenges and opportunities for those balancing work and caregiving responsibilities. The report highlights the need for policies that support flexible work arrangements and caregiving, ensuring that individuals can save adequately for retirement while managing their caregiving duties.
• The impact of technology: Technology has evolved beyond recognition over the last 50 years and future technological advancements will have a crucial role to play in improving outcomes and how pension schemes are managed. These developments will create new opportunities to engage with members, with AI tools providing more personalised information.Looking forward to the next decade, pension schemes will be able to deliver increased levels of guidance and support using AI capabilities.