New DWP workplace pension plans to help people boost retirement pots by £29,000
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 UK 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 on Monday, July 7. 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.
The UK Government said 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 its 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.'
Pension Schemes Bill
Other measures in the Bill 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.
The Department for Work and Pensions (DWP) said that while the benefits of the Bill are clear, significant challenges still remain with these benefits varied for different workers and different groups.
It added that 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.
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.'
More information on the Government's Pension Investment Review can be found on GOV.UK here.
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