The House of Lords has approved the Pension Schemes Bill, which is aimed at improving protection for pension savers and ensuring more guidance for businesses. The bill will now be taken through the House of Commons later this year.
The bill will ensure occupational pension schemes are accommodating for climate and economic change by encouraging pension trustees to showcase how they have done this for their members and the rest of the public.The bill will also attempt to protect pension savers from scams by tightening rules and guidance on transfers.
Additionally, the bill will set out to provide more support to ensure that members are making educated decisions about their future when withdrawing funds from their pension savings.
The bill also sets out to ensure that businesses do not make uninformed decisions with defined benefit schemes, and are protecting members and their pension pots. It will also create a new style of pension scheme, the collective defined contribution (CDC).
In CDC pension schemes, the risks lie with the individuals, but are shared collectively. The aim is to introduce more flexibility in occupational pension provision so that the pensions industry can offer a more sustainable and predictable scheme.
CDC schemes would require both the employer and employee to contribute to a collective fund. This would offer a target income at retirement rather than a specific income as with a defined benefit (DB) pension scheme. If the final income cost is under or over-funded then the level of member benefits can be adjusted to ensure all assets are equal to the liabilities relating to the target incomes.
The government has also added a requirement for trustees to set net-zero targets and limit the rise of average global temperatures.
Guy Opperman, minister for pensions and financial inclusion, said: “With this bill, we’re pushing ahead with our innovative and ambitious pensions agenda, one that delivers for the record numbers of people saving for retirement.
“This government has already taken a leading global role in tackling climate change and cutting emissions. The measures introduced through this bill will help towards protecting the planet and contribute to long-term member outcomes. The Pension Schemes Bill is a milestone in bringing pensions into the digital age. I am looking forward to guiding it through the House of Commons.”