A taskforce of industry executives and ministers from the Treasury and Department for Work and Pensions (DWP) will propose ways to cut costs and improve investment options.
Chancellor Rachel Reeves said the review will boost investment, increase pension pots and tackle waste in the pensions system.
The new Pensions Bill confirmed in King’s Speech could boost pension pots by more than £11,000, with further consolidation and broader investment strategies to potentially deliver higher returns for pensions.
The review will also look at how to unlock the investment potential of the £360bn Local Government Pensions Scheme, as well as how to tackle the £2bn that is being spent on fees.
Rachel Reeves, Chancellor of the Exchequer, said: “Despite a very challenging inheritance, this new Government is getting on with the job of delivering our mandate to get the economy growing so we can make every part of our country better off.
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“The review we are announcing is the latest in a big bang of reforms to unlock growth, boost investment and deliver savings for pensioners. There is no time to waste. That is why I am determined to fix the foundations of our economy so we can rebuild Britain and improve people’s lives.”
Pensions a priority
António Simões, chief executive of Legal & General Group, said: “As the UK’s largest manager of money for pension clients, we welcome the ambition set out by the Government today. Driving pensions capital into areas such as science, technology and infrastructure can help support better returns for millions of retirement savers, as well as stimulate much needed long-term growth for the economy.”
Emma Douglas, director of workplace savings and retirement at Aviva, said: “We welcome the Government’s determination to undertake a pensions review as an early priority. We fully support Government’s ambition to get pension funds invested in a way that both supports UK growth and improves outcomes for savers. We see this as an important next step and look forward to working with Government and industry on the review.”
However, Adrian Lowery, financial analyst at wealth management firm, Evelyn Partners, said: “The estimate that all this will boost individuals’ pensions by £11,000 is intended to bring some life to the proposals but it’s ‘finger in the air’ at best, depending on a wide range of assumptions and contingencies. At the time of Hunt’s Mansion House Compact it was claimed this would boost the value of the average DC pension by 12%.
“What would have a definite impact on pension savings and retirement outcomes is extending auto-enrolment by lowering the qualifying age to 18 and removing the lower earning limit – as has been recommended in a cross-party review– but this hasn’t yet been mentioned as part of the new Government’s pension proposals. A step further would be to raise the minimum auto-enrolment contribution rate.”
