The Pensions Commission: reforming the UK’s pensions system
The Pensions Commission, which had been established by the UK government in December 2002 to review the regime for UK private pensions, published a report on its findings on 2004 and 2005, in which it made a number of recommendations for reform.
Based on these findings and recommendations the government enacted two statutes: the Pensions Act 2007 and the Pensions Act 2008. Their objectives for pensions were to:
- Raise the state retirement age, reduce the contributions requirements, restore the earnings link, and end the opportunity to opt out of the additional state pension (2007 Act).
- Address the lack of pension provision in the private sector including the creation of new low cost savings vehicles and an obligation on employers to enrol all employees (2008 Act).
For many years in the UK, pensions occupational pensions had been rising in number and were relatively secure. “Before the Second World War, 1.8 million people had occupational pensions and, by 1975, this number had risen to around 12 million.”  However, “the costs of both public and private pensions were rising as life expectancy increased [and] in the early 2000s, the future of occupational pensions appeared in the balance: final salary schemes were closing and there was a rising concern about default risk.” 
By 2004, the situation had deteriorated significantly. “The proportion of UK private sector workers relying entirely on the state sector pension was 46% in 1995 and had risen to 54% by 2004. This powerfully illustrated the failure of private sector pensions and the weight of responsibility under which the state pension was labouring.” 
The public impact
The reforms have meant that “coverage has been boosted significantly with more than 5 million automatically enrolled into a workplace pension saving scheme since 2012”. 
One of the most authoritative surveys of pensions worldwide is ‘The Victorian Government of Australia and The Australian Centre for Financial Studies Melbourne Mercer Global Pensions Index'. The index “objectively ranks both the publicly funded and private components of 25 countries' pension systems, which together cover 58 percent of the world's population. Since the first index six years ago, the UK has continually improved its ranking, moving from a ‘C' grade in 2009 to a ‘B' grade in 2011. For the 2014 index, the UK's pension system achieved a ‘B' grade and a score of 67.6/100”. 
Stakeholder engagementThe main stakeholder was the UK government, principally the Department of Work and Pensions (DWP) and also the Treasury. The architect of the reforms was the Pensions Commission, which published its recommendations and then collaborated with the Trades Union Congress (TUC) and the Confederation of British Industry (CBI) to plan the reforms. The other main stakeholders were the pensions industry bodies, the pensions firms, and UK citizens.
Political commitmentThe then UK prime minister, Tony Blair, was committed to reforming the pensions system: he “became concerned with the collapse of final salary pension schemes in the summer of 2002 and, after a series of meetings with DWP and the Treasury in the autumn, became convinced that this was an area in which he needed to get closely involved”.  He then “gave significant attention to pensions, a remarkable five to six hours a week in the run up to the final negotiations which shows commitment of the government towards the reforms”. 
The most contentious aspect of the pensions reforms was the raising of the state retirement age. “The [Pensions] Commission spent a lot of time and effort on high-risk strategies to build consensus on the way forward … The DWP held events across the UK, each attended by around 300 people, testing citizens' responses to the report's findings ... Significantly, pre-polling showed that 80% of participants were averse to raising the state retirement age at the start of the day; whereas, at the end of the day, having been taken through the analysis, attitudes were ‘fundamentally different'.”
In 2012, a YouGov survey found the state retirement age reform to be largely unpopular. The response to the question “Under current plans people born in 1977 or after will not be able to receive a state pension until the age of 68. Thinking about your current career or occupation, how comfortable or uncomfortable do you feel about not being able to claim a state pension until at least the age of 68? [was] Very comfortable 7, Fairly comfortable 24, TOTAL COMFORTABLE 31; Fairly uncomfortable 33, Very uncomfortable 29 TOTAL UNCOMFORTABLE 62 (Don't know 8)”. 
Clarity of objectivesThe pensions reform process had the overriding objectives of addressing the pensions deficit and the inadequate pensions provisions of the majority of UK citizens. There were a number of ways of meeting these objectives in the reforms, principally, raising the pensions age, reduce contributions requirements, restore the earnings link, ending the state pension opt-out, creating low-cost savings vehicles and placing an obligation on employers to enrol all employees in their occupational pensions scheme. However, these reforms, which formed part of the 2007 and 2008 Pensions Acts were not directly measurable.
Strength of evidence
The Pensions Commission carefully analysed the existing pensions system and set it against socioeconomic and demographic data and projections. For example, the Commission predicted that the percentage of the population aged over 65 would double by 2050, putting further strain on the pension system and that 60 percent of employees over 35 were on course to have inadequate pensions.
The Commission placed a “strong emphasis on going back to original data, building models from scratch and drawing in international expertise. The Commission became expert in issues such as population dynamics and they built up data in areas which had not been previously analysed like pension provision among ethnic minorities”. 
The Pensions Commission carefully evaluated fiscal concerns, using their own models and analyses alongside the advice of international experts on the macroeconomics of pensions. Key concerns evaluated included the proportion of workers paying into private pension schemes relative to those who would have to rely entirely on a state pension, and the burden on small businesses of providing occupational pensions.
The Commission itself was an appropriate entity to design the pensions reforms, while the DWP was well placed to implement their findings. The fact that the Commission had only three members was considered to be a significant advantage in allowing “a shared sense of trust to develop between the Commissioners that allowed them to focus on the problem solving and analysis required to unpick the pension problem rather than manoeuvring to try and steer the committee in one direction or another”. 
The legal feasibility was addressed by the Pensions Acts of 2007 and 2008, which enshrined the reforms in statutory legislation.
The Pensions Commission consisted of three commissioners nominated by the prime minister, the chancellor of the exchequer and the secretary of state for work and pensions. They all had significant and relevant experience in economics and social issues:
- “Adair Turner was Vice-Chairman at Merrill Lynch at the time. Turner had taught economics at Cambridge and the LSE, worked at McKinsey and Company from 1982 to 1995 and had been Director General of the CBI from 1995 to 1999. 
- “Jeannie Drake was at the time the deputy general secretary for the Communication Workers Union and [in 2005] the president of the TUC ...
- “John Hills was, and still is, professor of social policy and director of the Centre for Analysis of Social Exclusion (CASE) at the London School of Economics.”
The implementation of the Commission's findings and proposed reforms was the responsibility of the DWP.
As this is directly related to money, it is easily measurable. The government can measure how many are enrolled in a pension scheme and assess their contributions to see how effective the reforms have been.
Examples of tracking pension funds are common in the media e.g: “FTSE350 pension deficits improve by £17 billion”. 
The Labour government cooperated with the DWP and the Treasury to set up the Pensions Commission to review anomalies in the UK's pensions system and to propose recommendations for reform. Having published two reports of its findings and recommendations, the Committee then planned the reforms in collaboration with the government, the TUC and the CBI.
The Pensions Commission and the DWP also collaborated with the pensions industry and relevant NGO to validate and gain acceptance for its reforms. However, there was some resistance from UK citizens, particularly to the raising of the state retirement age.
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