Pensions and the new Government

While the outcome of the general election on 4 July was widely predicted, the new Government has not wasted any time putting forward high level proposals for the UK pensions system and announcing a full scale review.?

?The King’s Speech on 17 July announced a new pensions bill.? For the most part, it looks like "business as usual" but there are some points worth noting:

• measures will be introduced to enable individuals?to consolidate small DC pension pots
• a standardised value for money test will be introduced for DC schemes
• trust based DC schemes will need to offer a retirement/ decumulation solution or solutions (including a default solution), and
• measures to promote commercial DB superfunds will be introduced.?

Then, on 20 July (a Saturday, no less) Rachel Reeves, the Chancellor, announced a “landmark pensions review to boost UK investment and savings”. ?A key part of the review is looking at the investment of defined contribution and Local Government pensions assets, to “unlock” investments into the UK economy:? ￡8 billion from defined contribution and ￡360 billion from Local Government schemes.? It seems a key focus here will be the consolidation/ pooling of pension scheme assets, in particular to identify anything else that should be added to the new pensions bill.

While it seems incredibly sensible to look at the pension scheme investment landscape to ensure individuals are getting value for money and healthy investment returns, the link between this and pension scheme investment in the UK economy seems more difficult to understand.? But this should become clearer as the review gets underway.?

And this is only the beginning.? The review announced on 20 July included the following glimpse into the future:? “The next phase of the review starting later this year will consider further steps to improve pension outcomes and increase investment in UK markets, including assessing retirement adequacy.”

Back to the here and now, unfortunately, we do not have clarity around the new DB funding code being finalised (which will apply to all funding valuations from 22 September 2024) and there does not appear to be any indication from the King's Speech about when the new Government will progress the Mansion House proposals regarding a new regime for surplus assets where a pension scheme is not being wound up.??

In addition, there was no mention in the King’s Speech of extending?the auto-enrolment requirements to capture younger workers and workers being paid less than the lower earnings limit (currently ￡6,240).??And the new Government seems to have moved on from the abolition of the lifetime allowance for pension savings; there is no mention in the King’s Speech of this allowance being reintroduced.??

Of course, it is still very early days.? We have some high level goals and ambitions but we need to see how these develop into detailed proposals.?