The Pension Schemes Bill has passed througgh Parliament and is due to receive Royal Assent shortly.
A compromise was reached around mandation powers in the House of Lords yesterday (28 April). This was the final round of amendments to the bill.
It has been designed to make pensions easier to understand and manage, and drive better value over the long term.
The bill will ensure savers get good returns and drive economic investment by requiring defined contribution (DC) schemes to prove they are value for money to avoid underperforming schemes, simplifying retirement choices by all pension schemes offering default routes to a retirement income, and consolidating and professionalising the Local Government Pension Scheme (LGPS).
It will also bring together small pension pots worth £1,000 or less into one scheme certified as delivering good value and create new rules for multi-employer DC scheme megafunds of at least £25 billion, so bigger and better pension schemes can drive down costs.
A series of consultations will lay out the rules behind the headline policy direction, with industry stakeholders contributing as regulatory framework is finalised.
Maurice Titley, commercial director: data and dashboards at Lumera, said: “The progression of the Pension Schemes Bill to Royal Assent is a landmark moment that heralds a significant evolution of the UK’s pension system. For trustees and providers, the legislation will create a regulatory environment that definitively requires strong governance and robust data to adapt. In the DC market, the reforms will usher in a period of accelerated consolidation activity as providers look to achieve scale.
“The growing focus on providing default retirement solutions and Value for Money will force providers to invest in their data and administration systems to ensure that their operations are able to cope with this shift. Ultimately, technology is likely to be the defining differentiator in this new environment. The challenge for the industry is not understanding what needs to be done but delivering it safely and consistently within live systems while maintaining member trust.”
Helen Forrest Hall, chief strategy officer at the Pensions Management Institute, added: “We fully supported the Lords in opposing a sweeping reserve power to require specific asset allocations and are pleased that the government has introduced important guardrails. As the bill now moves towards Royal Assent and implementation, our focus will be on working with government, regulators and the industry to ensure these reforms strengthen the pensions system, support long-term growth and, above all, deliver better outcomes for scheme members.”
