Average worker expected to benefit by up to £29,000 by the time they retire, under measures introduced by the Pension Schemes Act, which received Royal Assent today.
Photo by Sarah Agnew / Unsplash
New legislation has been formally passed to reform the UK’s pensions sector – and the £2 trillion worth of pensions it oversees. New measures include a requirement on pension scheme providers to prove that they are delivering value for money, enabling the automatic consolidation of small pension pots, and creating larger, better-performing funds.
The changes are in part a response to changing ways in which we work, with many more of us moving between jobs over our careers rather than having a single job for life. That means we tend to acquire several small pension pots, which can be difficult to keep track of. The new law enables these pots to be brought together automatically.
In addition, the new act introduces a value-for-money framework that aims to protect savers from getting stuck in underperforming pension schemes. Under the new provisions, pension schemes managers and trustees must offer clear default options for turning savings into retirement income. The aim is to give people who choose to do this a sustainable income in their retirement.
Other measures include creating multi-employer defined contribution ‘megafunds’ of at least £25bn to drive down costs and enable investment in a wider range of assets, including in UK businesses and infrastructure.
Torsten Bell MP, the Minister for Pensions, says: ‘Today is a landmark moment for the 22m workers building up a pension pot across the UK. For too long, our pensions system has been fragmented and rarely ensures that people’s savings are working hard enough to support them in retirement. The Pensions Schemes Act will change that by creating schemes that drive down costs, deliver higher returns, and give savers the security they deserve.’
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