Tag: Pension Schemes Bill

Pensions Bill: Workers in line for £29,000 boost

Bill to ‘transform pensions landscape for years to come’

  • Pension Schemes Bill could boost returns to pension saving by thousands of pounds
  • Changes will also make it easier for savers to access and manage their pensions

Working people on an average salary who save into a pension pot over their career, could benefit by up to £29,000 by the time they retire thanks to major Government reforms that will consolidate small pension pots, ensure schemes are value for money, and create larger pension schemes.

The figure was revealed as the Pension Schemes Bill returns to Parliament for its second reading today.

Reforms in the Bill, which have received wide-spread support from the pensions industry and consumer groups, will support 20 million pension savers to get more from their pension pots and be better prepared for retirement.

The Bill will bring together small pension pots worth £1,000 or less into one pension scheme that is certified as delivering good value to savers, making pension saving less hassle and more rewarding. At present many people struggle to keep track of multiple small pensions as they move jobs and can pay high fees as a result.

In future pension schemes will also need to prove they are value for money, helping savers understand whether their scheme is giving them good returns and protecting them from getting stuck in underperforming schemes for years on end.

These measures will lay the foundation for the upcoming Pensions Review to examine how we get to a fair and sustainable pensions system, supporting growth and delivering on the government’s Plan for Change by putting more money into people’s pockets.

Minister for Pensions Torsten Bell said: “We’re ramping up the pace of pension reform, to ensure that people’s pension savings works as hard for them as they worked to save.

“The measures in our Pension Schemes Bill will drive costs down and returns up on workers’ retirement savings – putting more money in people’s pockets to the tune of up to £29,000 for an average earner and delivering on our Plan for Change.”

Other measures include:

  • New rules creating multi-employer DC scheme “megafunds” of at least £25 billion, so that bigger and better pension schemes can drive down costs and invest in a wider range of assets.
  • Simplifying retirement choices, with all pension schemes offering default routes to an income in retirement.
  • Increased flexibility for Defined Benefit (DB) pension schemes to safely release surplus worth collectively £160 billion, to support employers’ investment plans and to benefit scheme members.

The reforms will also unlock long-term investment in the UK economy by removing barriers to growth, strengthening the security and governance of pension schemes and ultimately delivering better returns for people saving for their retirement.

The pace of pension reform has ramped up with measures in the Bill set to revolutionise the pensions landscape in the coming years. While the benefits of the Bill are clear, significant challenges still remains with these benefits varied for different workers and different groups.

This is why the upcoming Pensions Review will examine challenges such as pension adequacy to ensure underserved groups do not miss out on the benefits arising from these measures.

Reforms announced as part of the Bill will also future proof the Local Government Pension Scheme (LGPS) by leading to the consolidation of all £400 billion of assets into a small number of expert asset pools which can invest in local areas infrastructure, housing and clean energy.

Minister for Local Government and English Devolution Jim McMahon OBE said: “This Bill will ensure the Local Government Pension Scheme is fit for the future and harness its full potential, with assets due to reach £1 trillion by 2040, and will strengthen investment in local communities to accelerate growth as part of our Plan for Change.

Zoe Alexander, Director of Policy and Advocacy for PLSA: “The introduction of the Pension Schemes Bill is a significant milestone, bringing forward necessary legislation to enact important reforms that have the full backing of the pensions industry.

“This includes small pots consolidation, the Value for Money regime, decumulation options and changes to give DB funds more options for securing member benefits over the long-term.

“Once fully implemented, these measures should reduce the cost of administering pensions, remove complexity for savers and help ensure schemes are maximising the value they provide members.”

£1,000 retirement savings boost from plans to bring together small pension pots

Millions of people will find it easier to track their pension savings with the creation of a small pensions pot consolidator, in reforms unveiled by the pensions minister today (Thursday 24 April).

  • UK Government unveils reforms to combine small pension pots to make working people better off as part of Plan for Change
  • Move is set to boost retirement savings for the average worker by around £1000 and save businesses £225 million a year in unnecessary admin costs
  • Comes as part of Pension Schemes Bill which will drive investment in pensions industry and deliver on the government’s growth mission

This new initiative will tackle the growing problem of small, forgotten pension pots that many people accumulate as they move between employers over their working lives. There are now 13 million of these small pots, holding £1,000 or less, with the number increasing by around one million a year. 

This is a hassle for savers and can stop them getting a good return on their savings if they have to pay multiple flat rate charges. Overseeing all these small pots also costs the pensions industry around £225 million in unnecessary admin costs.  

Under reforms introduced by this government as part of the Pension Schemes Bill, each individual’s small pots will be brought together into one pension scheme that is certified as delivering good value to savers. Individuals will retain the right to opt out.

This will cut costs for savers and make it easier to keep track of their pensions while boosting living standards and make working people better off. It will also cut red tape for businesses managing the schemes and unlock economic growth as part of the Plan for Change.

This announcement will reduce costs as well as hassle for savers, in time increasing the pension pot of an average earner by around £1,000 – boosting living standards and making working people better off. It will also cut red tape for businesses managing the schemes and unlock economic growth as part of the Plan for Change.

Minister for Pensions Torsten Bell said: “It’s great news that more people are saving for their retirement. But I want to make pension saving as simple and rewarding as possible.

“There are now more small pension pots in the UK than pensioners – raising costs and hassle for workers trying to track their savings. It also costs the pensions industry hundreds of millions of pounds every year. 

“We will automatically bring together people’s small pots into one high performing pension, reducing costs as well as hassle for savers. In time this could boost the pension of an average earner by around £1,000 as part of our Plan for Change to put more money in people’s pockets.”

The announcement follows the work of the Small Pots Delivery Group. Their findings, aimed at supporting the design and implementation of the new small pots consolidator scheme, include:

  • A Small Pots Data Platform to identify and source the pension pots that could be consolidated.
  • A framework setting out the rules a scheme would need to follow to become a consolidator scheme. These would include already being in an Automatic Enrolment qualifying scheme, having a specified level of scale to manage expansion, providing good value for money for their members and providing additional protection for members from flat fee charges.
  • Safeguards for savers whose pension pots would be consolidated which include a member op-out option. 

Transforming the pension landscape through the Pension Schemes Bill, set to be introduced in Parliament later this Spring, will deliver on the government’s manifesto commitment to boost investment and returns for savers and make working people better off. 

The Bill will help over 15 million people, boost pension pots by £11,000 and spur on greater investment in productive assets. 

Zoe Alexander, Director of Policy and Advocacy at the Pensions and Lifetime Savings Association, said: “The accumulation of small pots creates unnecessary cost and complexity for savers and schemes alike. The PLSA has worked extensively with industry and the DWP to propose solutions and supports the model being proposed by the Government.

We look forward to working on delivering the recommendations of the Small Pots “Development Group and are pleased the Government is tackling this long-standing issue in the Pension Schemes Bill.”

Rocio Concha, Which? Director of Policy and Advocacy, said: “Which? called for the consolidation of small pots under £1,000 before the election, so we are delighted that the government is committing to doing this – a move that will provide greater value for savers and support them to keep track of their pensions. 

“Which? looks forward to working with the government to ensure the pensions system is fit for the modern age.”

Gail Izat, Workplace Managing Director at Standard Life, part of Phoenix Group said: “The number of small pots in the system is growing at a rate of knots and ultimately heightens the risk that people will lose track of their hard-earned savings. 

“The introduction of consolidators that can administer these pots effectively and invest them dynamically will be a step forward and when combined with pension dashboards will empower people to take control of their savings. We look forward to working with government on the creation of this new system.”