UK workers to get £29,000 pension boost under new retirement rules
Pension savers could get a boost of up to £29,000 by the time they retire thanks to major new legislation, according to Government figures.
Small pension pots worth £1,000 or less would be consolidated into larger schemes under the new Pension Schemes Bill, which returns to Parliament for its second reading today.
As well as creating better opportunity for growth, Labour says this would help solve the issue of people losing track of multiple small pension pots.
You can end up with lots of small pots if you change jobs regularly, or if you've changed address and you didn't update your pension provider with your details.
Labour estimates that working people on an average salary who save into a pension pot over their career could get up to £29,000 extra by the time they retire.
It is thought 20 million pension savers would benefit. In future, pension schemes will also need to prove they are value for money and help savers understand whether their scheme is giving them good returns.
Another measure included the bill is a plan to move billions of pounds of pension savings into larger "megafunds". This is where smaller local authority and private workplace schemes are consolidated together, in the hope that larger funds will generate greater returns. There are similar schemes that run in Australia and Canada.
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.'
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 Pensions and Lifetime Savings Association: '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.'
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