Plans revealed to ensure fairer pension schemes

Pensions Minister, Laura Trott, has announced plans to ensure private pensions can provide fairer and more predictable returns for those saving for retirement.

Reforms announced will help address the pension inequality gap which has opened up since the decline of Defined Benefit (DB) and the emergence of Defined Contributions (DC) pension schemes. Proposals include plans for:

• Schemes to disclose their investment performance, costs and charges, and quality of service via clear and comparable metrics to the benefit of savers;
• Reforms to the charge cap, giving schemes more flexibility to invest in so-called “illiquid assets” such as start-up companies, renewables and infrastructure;
• Feedback on workable solutions to tackle the issue of small pots;
• An extension of Collective Defined Contribution (CDC) schemes, most significantly to include multi-employer models

A consultation has also launched on a new Value For Money (VFM) framework, developed with the The Pensions Regulator and the Financial Conduct Authority, to set out the service levels and value derived from investments that savers should expect from pension providers.

Minister for Pensions Laura Trott MP said:

“There is a pension inequality gap between those who had secure retirements thanks to DB, to much more uncertainty now. Since 2012, Automatic Enrolment has transformed the pensions landscape in the UK for the better, but we know there’s more to be done to ensure a fairer future for savers.

“Being in an underperforming pension scheme can lead to someone missing out on thousands of pounds. The Value for Money framework and our new measures will improve security and create better returns for savers, so they can enjoy the retirement they’ve worked so hard for.”

Executive Director of Regulatory Policy, Analysis and Advice at The Pensions Regulator, David Fairs said:

“Ensuring every pound that savers put into their DC pension pot delivers value for money is vital to help people achieve the best possible retirement. The measures announced as part of this far-reaching reforms package deliver on our commitment to put savers at the heart of all we do.

“Our joint Value for Money framework will drive greater transparency and standardisation of reporting across the DC pensions market, allowing trustees to make more informed decisions and improve long term outcomes for savers. I urge the industry to take part in these important consultations.”

Executive Director of Markets at the Financial Conduct Authority, Sarah Pritchard said:

“Pensions are complex, and savers need to be able to trust that their providers have the information they need to make the right choices. These proposals will help ensure that they take a wide ranging and long-term view – value for money is not just about costs and charges.

“We will continue to work with Government, other regulators, and industry to deliver long term value and support savers in their retirement.”