The new Labour government will introduce a Pension Schemes Bill to improve outcomes for savers in private sector pension schemes.
In the State Opening of Parliament, His Majesty King Charles introduced plans for the Pension Schemes Bill to strengthen pension investment.
The bill is designed to help people get more from their pension assets by increasing the amount available for them to save. The government suggests that it could help a defined contribution (DC) saver to have an increase of 9%, or £11,000 in their pension pot after saving over their lifetime.
Measures in the bill include a focus on consolidating small DC pension pots and ensuring that all members are saving into a scheme which is delivered through the Value for Money (VFM) framework. The government will introduce a standardised test to ensure that trust-based DC schemes deliver value.
Pension schemes will be required to offer a retirement income solution, including default investment options, not just a savings pot at the point of retirement. The aim is to improve outcomes for savers, which the government hopes will lead to more funds being invested for longer, boosting economic growth.
Simon Kew, head of market engagement at Broadstone, said: “The Pensions Bill was a surprise inclusion in the King’s Speech but largely continues the direction of travel from the previous government in various areas such as the consolidation of small pots and a Value for Money framework.
“The problem of small pots is likely to take years to solve so it is good to see that there is an urgent desire to fix this issue. While there is a mention of commercial superfunds, which have already completed their inaugural deals, the public sector consolidator idea is conspicuous by its absence.
“The legislative direction of travel outlined in the King’s Speech is understandable as a smaller number of larger pension schemes brings efficiencies for providers, investment opportunities for the government and easements for regulators. The hope is that the combination of these will lead to better outcomes for members while these goals clearly remain consistent with the terms of any deeper review of financial services and pensions.
“It may clear the way for the wide-ranging Pensions Review to tax reliefs, the state pension and advice/guidance; all areas which could benefit with from longer and considered consultations.”
