What did the pension bill revealed in the King’s speech contain?

The Labour Party has announced a pensions bill that aims to make retirement investments central to its drive to boost the economy.

The legislation unveiled in today’s King’s Speech confirms the party’s plans to press ahead with Conservative plans to tap into savers’ pension pots for a general growth strategy.

He also says this could boost individual funds, but one pension expert advises savers to take it “with caution” as it depends on the investment performance of their own fund.

Notable measures include:

– An effort to address the losses of pension funds and the multiplier funds that people end up receiving over their working lives;

– Measures to require pension systems to offer workers ways to convert pension funds into income when they retire, not just send them off to find their own solutions;

– Testing to ensure that pension plans are up to par, investing productively and generating value.

“The Pensions Bill will put millions of people’s pension funds at the heart of the new government’s drive to boost investment in the UK and ultimately drive long-term economic growth,” said Tom Selby, director of public policy at AJ Bell.

‘The claim that the bill’s measures could lead to higher pensions should be taken with caution, as this will ultimately depend on the performance of their investments.

‘Of course, it is possible that this reform package will result in better investment returns for members, but this is never guaranteed.

‘Investing in private equity, in particular, can involve significant costs and risks, so it is crucial that trustees choosing to move in this direction focus on delivering good retirement outcomes above all else.’

He continued: “Savers rightly expect to receive good value for money from their schemes, so the emphasis on fund performance (particularly the difference between the best and worst performing default funds) effectively warns underperformers that they need to up their game.”

‘The Government also intends to drive further consolidation of pension schemes, partly to improve the value received by members and partly to help generate higher levels of investment in UK Plc.’

‘When it comes to converting your pension into retirement income, the government says it plans to require all occupational pension schemes to offer a retirement income solution to members.

‘While we don’t have details on what this will mean exactly, there are many occupational schemes that do not offer drawdowns to their members, meaning many people will need to transfer to receive a flexible income.

‘A key aspect missing from this bill is any mention of expanding automatic enrollment. There is broad consensus that minimum contributions under automatic enrollment will need to increase.

“Legislation for these changes is already in place, but the big question is when will it be implemented?”

Helen Morrissey, head of retirement research at Hargreaves Lansdown, said: ‘Today’s Pensions Bill heralds positive news for people’s pensions, with simplicity and greater flexibility.

‘The Government estimates that the introduction of these measures could increase the average person’s pension pot by 9 per cent over their career.

‘Measures have been taken to address the persistent problem of “lost jackpots”, which consists of automatically gathering deferred jackpots in one place.

Schemes will also be under pressure to prove they offer value for money by introducing a standardised test.

“Determining metrics relating to cost, returns, service and member engagement will be crucial here. Value for money should also drive consolidation within the pension market, resulting in a smaller number of much larger defined contribution schemes.”

The bill also includes measures requiring plans to offer a retirement income solution to members. Individuals are likely to have funds in a variety of plans.

‘Ensuring that an individual has a complete overview of their savings and the opportunity to consolidate them before making retirement-related decisions will be crucial to achieving better outcomes.’

Kirsty Anderson, Retirement Specialist at Quilter, said: ‘In today’s King’s Speech, Labour has included the consolidation of small defined contribution funds on its legislative agenda, thereby addressing a crucial issue in modern retirement saving.

‘Our working habits have changed dramatically in recent decades. Previously, people could have one or two jobs throughout their lives, which translated into one or two pensions.

‘However, with the rise of automatic enrolment and more frequent job changes, people are now accumulating multiple, small pension pots. This unintended consequence can complicate saving for retirement and may even cost savers money.’

Anderson says three main options are being considered to manage small boat consolidation:

– The pot follows the member

– Default Single Consolidator

– Multiple default consolidators.

Calum Cooper, director of pension policy innovation at Hymans Robertson, said: ‘The new government is clearly identifying the importance of pensions and the outcomes that will be vital for millions of savers.

‘With the inclusion of measures around small containers and value for money, it is good to see a continuation of some of the work already done.

“We are also very encouraged to see that the focus is once again on the fact that a pension is a pension and not just a savings product.”

Cooper says the bill could lead to sophisticated “direct” decumulation products to help people transition from work to retirement safely and successfully.

He added: “It is clear that the Government wants pensions and the National Wealth Fund Bill to play a role in providing a significant stimulus to UK productivity.

‘To do this, the pensions sector will need clarity: a practical roadmap and clear and attractive opportunities to invest at scale.

“There is a huge social opportunity in unlocking the productive potential of our £2.5 trillion pension pot.”

Simon Kew, Head of Market Engagement at Broadstone, said: ‘The Pensions Bill was a surprise inclusion in the King’s Speech, but it largely continues the direction of the previous government in a number of areas, such as consolidation of small funds and a value for money framework.

‘The small pot problem is likely to take years to resolve, so it’s good to see there is an urgent desire to address this problem.

‘While commercial superfunds, which have already completed their inaugural arrangements, are mentioned, the idea of ​​a public sector consolidator is conspicuous by its absence.

‘The bill also contains measures for pension scheme trustees to offer savers retirement products so that they have a pension and not just a nest egg when they stop working, which may help boost engagement.

‘The challenge of retirement income from defined contribution funds is enormous and bringing some paternalism back into the system seems to be the only way forward.’

‘Government analysis suggests it will increase the size of the pot at retirement by up to 9 per cent for the average earner who contributes to a pension over their career, which will be a big boost for savers.

‘Unsurprisingly, there is a lot of focus on productive investment of pension capital, but that may be a more difficult task to solve in the short term.’