King Charles has unveiled Labour’s plans for a new pension scheme to help boost people’s savings and drive economic growth.
The Pension Schemes Bill is designed to increase the amount available for pension savers. It could help an average earner in a defined contribution scheme accumulate over £11,000 more in their pension pot by the time they retire.
The move is estimated to support over 15 million people who save in private-sector pension schemes.
Speaking to parliament today, King Charles said: “Stability will be the cornerstone of my Government’s economic policy and every decision will be consistent with its fiscal rules.
“It will legislate to ensure that all significant tax and spending changes are subject to an independent assessment by the Office for Budget Responsibility. Bills will be brought forward to strengthen audit and corporate governance, alongside pension investment.”
What will the Pension Schemes Bill include?
The Bill will enable a private pensions market that “encourages consolidation” and focuses on “value and outcomes” for members to allow security in retirement and pension schemes to invest in a wider range of assets, driving growth.
Measures include preventing people from losing track of their pension pots through the consolidation of Defined Contribution individual deferred small pension pots.
This will allow deferred small pension pots to be automatically combined, boosting retirement income and delivering value for savers. It will also benefit pension schemes by reducing the number of loss-making pots they manage, enabling them to improve their offerings for savers.
The Bill will ensure all members save into pension schemes that deliver value through a standardised Value for Money framework.
Trust-based defined contribution schemes must meet a new test to demonstrate value, encouraging consolidation into fewer, high-performing, well-governed schemes.
This consolidation aims to enhance outcomes for savers and improve the efficient investment of funds. The Financial Conduct Authority will oversee the framework’s application to contract schemes, ensuring consistency across the entire pension market.
Pension schemes will be required to offer retirement income solutions, ensuring individuals have a pension rather than just a savings pot upon retirement.
This measure aims to improve savings outcomes and encourage longer-term investments, potentially boosting economic growth through productive asset investments.
The Defined Benefit (DB) market will be consolidated through commercial Superfunds. This aims to offer “greater protection” for members in closed legacy Defined Benefit schemes from the risk of losing part of their pension if their employer becomes insolvent.
The Bill will affirm the Pensions Ombudsman (TPO) as a competent court, eliminating the need for pension schemes to seek court approval to enforce TPO decisions on overpayment recovery. This change will reduce pressures and costs for courts, schemes, and members, keeping recovery expenses minimal.
Finally, the Bill aims to amend the Special Rules for End of Life (Pension Protection Fund and Financial Assistance Scheme (FAS)) by extending the definition of ‘terminal illness’, allowing eligible members within the Pension Protection Fund and the Financial Assistance Scheme to receive a lump sum payment at an earlier stage.
