A review of pensions, including the age of qualifying for auto-enrolment and the state pension, has been ordered by the UK Government.

It is required to reassess the state pension age every six years and the revived Pensions Commission will look at age qualification as well as ways of improving savings rates among the young, the lower-paid, women and the self-employed. The Commission is expected to report back to the government in 2027.

The auto-enrolment scheme was set up in 2012 and requires 8% of wages to be saved for a pension, of which 3% comes from employers

A likely recommendation is that it comes into effect earlier than the current age of 22.

Those eligible for auto-enrolment have to be earning more than £10,000 a year. Government research shows that only 21% of 18 to 21-year-olds are saving into pensions. For 22 to 29-year-olds, the figure rises to 86%.

While the auto-enrolment rate is expected to rise, the government has said this will not happen in the current parliament.

Businesses fear that further change, particularly to auto-enrolment, will add to companies’ costs.

Neil Carberry, chief executive of the Recruitment and Employment Confederation, said: “There is no doubt that sustainable pension saving matters and one of the great successes of the last 20 years is the consensus-based introduction of automatic enrolment and employer contributions from 2012.

“But that change wasn’t free; businesses have stepped up to pay more in partnership with their employees. Any review to this settlement needs to be done with business, not to them.

“We are particularly concerned at the wider impact of this announcement. Employment costs in the UK have been rising and we must be a competitive and attractive place to create jobs. Many business leaders will see this as another potential increase in costs.”

Financial planning company Nucleus has made several calls for the introduction of a Pensions Commission including an open letter to the Pensions Minister Torsten Bell in March this year

Andrew Tully, technical services director at Nucleus said: “It’s never been clearer that the UK public needs to start planning and saving for later life much, much earlier. But they need support from a pensions system that is consistent, stable and encourages long-term saving. 

“Automatic enrolment was a recommendation by a Pensions Commission reporting in 2004 and 2005, which has been a great step forward in encouraging more people to save for their retirement. 

“However more needs to be done and we firmly believe that establishing a new Pensions Commission could again make balanced recommendations to encourage long-term savings, while promoting greater consistency in pension and savings rules.”

Morgan Vine, director of policy and influencing at Independent Age, said: “This is an important opportunity to make sure that future pensioners have an adequate income so they can live a dignified later life.

“The last Pensions Commission was transformative for many and our research is clear that, without intervention, poverty in older age will rise, so action to prevent this is vital.

“We are disappointed that the Review will not include a focus on the incomes of people currently over State Pension age.

“Every day our advisers hear about the difficult decisions older people on a low income are making to survive, including skipping meals and reducing the number of showers they take to save money.

“We urge the UK Government not to forget the almost two million older people currently living in poverty and the further one million hovering just above the line and put in place tangible changes to support them too.”