The UK’s pension system is set to be overhauled under the new Labour government, with sweeping changes unveiled in the King’s Speech today.
King Charles has confirmed that Prime Minister Keir Starmer will “strengthen investment in pensions” as part of the Pensions Bill.
Under the legislation, 15 million Britons saving in private pensions will benefit from higher returns.
The bill aims to increase the amount available to pension savers and is expected to help the average worker increase their pension savings by £11,000.
This would apply if the employee in question had saved throughout his life in a defined contribution scheme.
Building on the King’s Speech, the Pensions Bill encourages greater consolidation of the private pensions market for the benefit of savers.
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King Charles’ speech highlighted Labour’s plans to reform private pensions
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What does the pension bill contain?
The bill provides for various measures that will impact citizens’ pensions.
These include:
- Preventing individuals from losing track of their pots by consolidating small deferred defined contribution pension pots
- Ensure that all members save in retirement plans that deliver value through a value for money framework
- Introduce a requirement for all pension schemes to offer products so that Britons have a pension and not just savings
- Consolidating the defined benefit market through commercial pension funds
- Reaffirm the role of the Pensions Ombudsman (TPO) as the competent court
- Amendment of special end-of-life rules (Pension Protection Fund and Financial Assistance Scheme (FAS)).
Under these plans, an individual’s deferred pots will automatically be pooled in one place to maximise retirement income.
In addition, the Financial Conduct Authority (FCA) will be responsible for ensuring that there is a standardised test that all defined contribution schemes must meet to prove their worth.
More options will be available to retirement savers under the plans, which hope to encourage greater long-term investment.
Finally, the consolidation of the defined benefit pension plan market through commercial super funds should provide better protection for those who use these plans.
Workers with private pension funds should benefit from the changes
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David Lane, Managing Director of TPT Retirement Solutions, said: “The inclusion of a new Pensions Bill in the King’s Speech is encouraging for those who want reform to improve members’ retirement outcomes.
“This bill will allow the government to quickly implement the major changes needed once it has completed its pension review. We hope that the launch of this review will take place soon.
“Encouraging more productive investment in the UK may be welcomed by trustees who will be open to increased allowances. However, the government must not force trustees to invest at the expense of their fiduciary duty. Investment performance must remain the priority for pension schemes.
“We urge the government to implement much-needed pension reforms that do not require new primary legislation. The most significant of these is reducing the automatic enrolment age to 18 and removing the earnings cap on contributions. These changes could significantly boost the pension savings of thousands of workers.”
