Reforms that will consolidate small pension pots, ensure schemes are value for money, and create larger pension schemes mean working people on an average salary could benefit by up to £29,000 by the time they retire.
The figure was revealed as the Pension Schemes Bill returns to Parliament for its second reading today (7 July).
Reforms in the bill, which have received wide-spread support from the pensions industry and consumer groups, will support 20 million pension savers to get more from their pension pots and be better prepared for retirement.
The bill will bring together small pension pots worth £1,000 or less into one pension scheme that is certified as delivering good value to savers, making pension saving less hassle and more rewarding. At present many people struggle to keep track of multiple small pensions as they move jobs and can pay high fees as a result.
In future pension schemes will also need to prove they are value for money, helping savers understand whether their scheme is giving them good returns and protecting them from getting stuck in underperforming schemes for years on end.
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Torsten Bell, minister for pensions, said: “We’re ramping up the pace of pension reform, to ensure that people’s pension savings works as hard for them as they worked to save.
“The measures in our Pension Schemes Bill will drive costs down and returns up on workers’ retirement savings – putting more money in people’s pockets to the tune of up to £29,000 for an average earner and delivering on our Plan for Change.”
Other measures in the bill include new rules creating multi-employer DC scheme “megafunds”, simplifying retirement choices, and increased flexibility for defined benefit (DB) pension schemes to safely release surplus cash.
Zoe Alexander, director of policy and advocacy at the Pension and Lifetime Savings Association (PLSA), said: “The introduction of the Pension Schemes Bill is a significant milestone, bringing forward necessary legislation to enact important reforms that have the full backing of the pensions industry. This includes small pots consolidation, the value for money regime, decumulation options and changes to give DB funds more options for securing member benefits over the long-term.
“Once fully implemented, these measures should reduce the cost of administering pensions, remove complexity for savers and help ensure schemes are maximising the value they provide members.”
