New brooms to deliver better pension frameworks

The Department for Work and Pensions has published an outline of the new Pensions Scheme Bill. There are three main objectives that the government want to achieve, and they are set out below. However, the process of consultation and redrafting that will no doubt be required will probably delay the parliamentary process for some time.

The three objectives outlined by the Minister for Pensions are:

“First, the Bill will enable the consolidation of multiple small pots, helping bring individuals eligible pots together in one place. This will support people to keep track of their savings so they can live better and more comfortably in retirement, but it will also mean that consolidators will generate scale at a greater rate, improving opportunity for investment.

“Second, the Bill will introduce a Value for Money Framework for defined contribution schemes, which you’ve already mentioned, to drive consolidation of the sector. We want to see fewer, larger providers who have the scale and expertise to invest in a more diverse portfolio. The Value for Money Framework will also contribute to economic growth, as there will be an increased focus on assets that can deliver long term value.

“Third, the Bill will introduce a requirement for pension schemes to offer retirement products, including a default retirement solution. It is crucial that we improve the options for people when they reach retirement age, and many have said to me that people feel as if they’re left on their own at that crucial time that they retire. But we need to go further, and in July, the Chancellor asked me to lead the first phase of the Pensions Review. I would like to thank all of you in this room who contributed to our Call for Evidence, especially given the short timeframe of our consultation.”