17 Jul 2024, 4:16 pm
The King’s speech, which laid out the new Labour government’s legislative priorities, contained details of a Pension Schemes Bill which would consolidate small pensions pots; test the value for money of schemes; oblige occupational pension schemes to offer new ‘retirement solutions’ and remove the requirement for courts to enforce decisions by The Pensions Ombudsman (TPO).
“The new Pension Schemes Bill will be welcomed by the pensions industry,” said pensions expert Rebecca Howard of Pinsent Masons. “The focus on consolidation in the pensions market provides important continuity. The proposed requirement on occupational pension schemes to offer new retirement products, so that members have a pension, not just a savings pot, marks a recognition that pensioners need a higher degree of retirement security than current drawdown products provide. Clearly, keeping assets invested in pension schemes for longer would also support the government’s plans for pension scheme investment to drive economic growth.”.
There was no comment, however, on the long-awaited extension of the auto-enrolment regime, perhaps on hold pending the holistic pensions review promised during the election campaign,” said Howard.
The government said that the Bill “will support over 15 million people who save in private-sector pension schemes get better outcomes from their pension assets”.
“This Bill is designed to increase the amount available for pension savers and could help an average earner, who saves over their lifetime in a defined contribution scheme, to have over £11,000 more in their pension pots with which to secure their retirement income,” said a government statement about the proposed law.
The Bill proposes measures to bring a person’s small defined contribution pension pots together automatically to “maximise income in retirement and deliver value for every saver”.
It introduces a standardised test for trust based defined contribution schemes aimed at ensuring schemes deliver value for money to savers. “This should result in consolidation in the pensions market by leaving a smaller number of well-performing, well governed schemes which will not only improve outcomes for savers but is likely to lead to more productive investment of funds,” said the government’s statement about the law.
It also places a new duty on those running occupational pension schemes to offer retirement income solutions rather than just a savings pot at retirement. “This is likely to lead to more funds being invested for longer, giving the potential for investments in productive assets – boosting economic growth,” said the government statement.
It said that consolidation of defined benefit schemes through superfunds will protect savers from the risk of losing part of their pension if a company goes insolvent, and changes to the rules of the Pension Protection Fund and Financial Assistance Scheme will allow more people with terminal illnesses to receive a lump sum at an earlier stage.
Rulings by TPO in relation to the recovery of overpayments must be enforced by a court. The Bill will end this, making TPO a ‘competent court’ in a measure that the government hopes will reduce costs and delays and relieve pressure on the courts service.