'Bigger pension pots for Britons': Chancellor says reforms will boost economic growth - here's how
The measures include a clampdown on schemes offering poor value for money to savers, creating 'mega' pension funds which can make better investment returns, and merging tiny pots.
The Bill will also make pension schemes offer people reaching retirement age clear 'default' options to turn their fund into an income to live on in old age.
The Government says millions of people planning retirement will find it easier to manage and get more from their pension pots as a result of its changes.
And it will tackle schemes delivering poor returns for savers with a range of reforms, including a new system to show how well they are performing, and forcing them to merge if they are falling short.
The Government recently announced that small pension pots worth £1,000 or less could be automatically moved into government-approved 'consolidator' schemes.
Meanwhile, in its Mansion House Accord, 17 pension firms voluntarily pledged to put 10 per cent of the funds they manage for savers into UK-based unlisted private businesses and infrastructure projects by 2030.
The Government has held off from forcing pension fund managers to invest more in the UK in the new Bill, but not taken this off the table for the future.
The Bill also includes:
- Creating multi-employer defined contribution pension 'megafunds' of at least £25 billion, so that 'bigger and better' schemes can drive down costs and invest in a wider range of assets.
- Consolidating and professionalising the Local Government Pension Scheme, with assets merged into six 'pools' that can invest in infrastructure, housing and clean energy.
- Allowing defined benefit (final salary) pension schemes to release surpluses totalling £160billion to support employers' investment plans and benefit scheme members.
Chancellor Rachel Reeves says: 'The Bill is a game changer, delivering bigger pension pots for savers and driving £50billion of investment directly into the UK economy– putting more money into people's pockets through the Plan for Change.'
Work and Pensions Secretary Liz Kendall says: '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.
'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.'
Former Pensions Minister Steve Webb, a partner at pension consultancy LCP, says: 'Whilst there are many worthy measures in the Bill, the biggest omission is action to get more money flowing into pensions.
'The Government's own projections show that more than 12 million people are not saving enough for retirement and yet the first major pensions legislation of the new Parliament does nothing to address this 'elephant in the room'.'
Webb, who is This is Money's retirement columnist, adds: 'The very fact that the adequacy of pension saving is not going to be considered until the second phase of the government's pensions review shows that this issue is unfortunately on the back burner.
'Measures such as consolidating tiny pension pots are helpful tidying up measures, but do nothing to tackle the fundamental problem that millions of us simply do not have enough money set aside for our retirement.
'With every passing year that this issue goes unaddressed, time is running out for people already well through their working life to have the chance for a decent retirement.'
Yvonne Braun, director of policy for long term savings at pension industry body the Association of British Insurers, says: 'This wide-ranging Bill is set to usher in the most large-scale pension reforms since auto-enrolment.
'The details will be crucial and we will scrutinise the Bill to ensure it puts the interests of savers first.
'We also urgently need to tackle the level of pension contributions which are too low to create an adequate retirement income for many. We urge government to set out the details of its adequacy review as soon as possible.'
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