DWP pension shake-up to give 20million Brits major boost to retirement savings
The Department for Work and Pensions (DWP) says the new pension shake-up introduced today will boost the retirement savings of over 20million Brits.
Labour's new Pension Schemes Bill is designed to help working people plan for their retirement by making pensions simpler to understand and manage and " driving better value over the long term."
One of the main parts of the bill will be the merger of small pension pots. The DWP says having multiple small pots can stop savers getting a good return on their retirement fund if they have to pay multiple flat rate charges.
The new bill will move small pension pots holding £1,000 or less into one for each Brit - there are currently around 13million pension pots with less than a grand in them.
The Bill also introduces a new system to show how well pension schemes are performing. This will cover "Defined Contribution" (DC) schemes, which are a type of private pension that you contribute to on a regular basis.
The DWP says this will help savers understand whether their scheme is giving them good value. If it's not, Brits will be able to move their savings somewhere.
The Bill will also require schemes to offer "clear default" options to grow pension pots for those approaching retirement. This means people will have "clearer, more secure routes to decide how they use their pension money over time."
Other measures part of the bill include:
Implementing new rules creating multi-employer DC scheme 'megafunds' of at least £25billion, so that "bigger and better pension schemes can drive down costs and invest in a wider range of assets"
Consolidating and professionalising the Local Government Pension Scheme (LGPS), with assets held in six pools that can invest in local areas infrastructure, housing and clean energy
Increased flexibility for Defined Benefit (DB) pension schemes to safely release surplus worth collectively £160billion, to support employers' investment plans and to benefit scheme members
Major players within the pension sector, including Phoenix Group, NEST, Now Pensions, and Royal London, have supported the new bill. The Pensions Regulator and the Pension Protection Fund (PPF) have also welcomed the bill.
Work and Pensions Secretary Liz Kendall said: "Hardworking people across the UK deserve their pensions to work as hard for them as they have worked to save, and our reforms will deliver a huge boost to future generations of pensioners.
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'The Bill is about securing better value for savers' pensions and driving long-term investment in British businesses to boost economic growth in our country.
'As part of our Plan for Change we're helping people find work, stay in work, and ensuring that work pays them back to give them the secure income in retirement they deserve.'
Chancellor of the Exchequer Rachel Reeves said: "The Bill is a game changer, delivering bigger pension pots for savers and driving £50 billion of investment directly into the UK economy– putting more money into people's pockets through the Plan for Change.'
Minister for Pensions Torsten Bell added: "We are ramping up the pace of pensions reform. Workers deserve to get better bang for each buck saved, and these sweeping reforms will make sure they do.
'Pension saving is a long game, but getting this right is urgent so that millions can look forward to a higher income in retirement.'
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