What happened to pensions in July 2024?
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Following the Labour Party’s victory in July’s general election, Rachel Reeves was appointed as the Chancellor of the Exchequer by the Prime Minister, Sir Keir Starmer . This makes her the first woman to hold the office in its over 800-year history.
But Reeves isn’t the only historic nomination under the new government. Since the turn of the 21st century, the UK government has had 10 Chancellors. Sounds like a lot? In that same timeframe there’s been 15 Pension Ministers. The newest incumbent, Emma Reynolds, has been appointed to hold two important roles simultaneously. She’s been designated as the Parliamentary Under-Secretary of State for Pensions and the Parliamentary Secretary for the Treasury.
By holding both positions, Reynolds will have the opportunity to contribute to pension policies and broader economic matters. This should promote a more integrated approach to tackling financial concerns, like the maintenance of State benefits, in the UK.
Changes to pensions under the new government
With a joint ministerial role across both the Department for Work and Pensions (DWP) and HM Treasury, Emma Reynolds is set to conduct a comprehensive review of the UK pension landscape, fulfilling a promise made by the Labour Party during their election campaign.
Reynolds will be joining Liz Kendall, the Secretary of State for Work and Pensions in the Department for Work and Pensions (DWP), and the Chancellor Rachel Reeves in the Treasury. Together they’ll be working towards a wish list of items that previous Pension Ministers have failed to successfully address. Here are nine areas the new Pensions Minister will need to tackle:
The Chancellor, Rachel Reeves, has initiated a thorough review of the UK pension system. The reform will take place in two stages, with a focus on improving pension management in the short and long term. The goal is to boost investment, grow pension pots, and tackle inefficiencies within the sector.
The Women Against State Pension Inequality (‘WASPI ’) movement was founded in 2015 to address the disproportionate harm caused by the new eligibility criteria for the State Pension to women born in the 1950s. Many women have complained they’ve been adversely affected due to poor communication from the Department for Work and Pension (DWP).
The Parliamentary and Health Service Ombudsman (PHSO) recommended compensation ranging from ￡1,000 to ￡2,950 per woman , which falls significantly short of the ￡10,000 per woman that WASPI had campaigned for. Now it’s up to the new government to decide how the WASPI women should be compensated.
The expansion of Auto-Enrolment has already been put into place. These changes include lowering the starting age from 22 to 18 and having pension contributions begin from the first penny earned, rather than the current starting point of ￡6,240. This should give young savers a boost in the long term.
Under the 2015 ‘pension freedoms’ savers can choose how they withdraw from their pension. But with life spans growing longer, it’s more important than ever for pension savings to support individuals throughout their whole retirement. One idea is requiring pension schemes to clearly outline withdrawal options.
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Currently just 16% of self-employed workers pay into a pension , causing millions to retire without adequate savings. This has the potential to put additional pressure on the future State Pension , so the government may need to consider how they could expand Auto-Enrolment to engage more self-employed workers.
The idea of ‘pot for life ’ is to provide workers with more control over their retirement savings. Traditionally, when someone changes jobs, their new employer selects a new pension scheme for them. Over time, this leads to multiple pension pots scattered across various providers.
It’s already technically possible to ask an employer to pay into a personal pension of your choice, rather than to use the Auto-Enrolment provider offered by them. But, employees rarely ask their employers to do this - and few employers agree. So far, the new government has made no commitment on pot for life.
The previous government announced plans to stimulate economic growth by encouraging investment in UK companies from UK pension funds. Labour has signalled they support this reform. However, of all the pension recommendations, this policy has been met with a high level of criticism .
Currently the earliest you can access your private or workplace pensions is from age 55 (rising to 57 in 2028); while you’re currently eligible for the State Pension from age 66 (rising to 67 by 2028). One proposed change is further increasing the minimum pension age, potentially improving retirement fund sustainability. It’s worth noting that such policy moves are often unpopular with the general public.
Back in 2002, the Secretary of State for Work and Pensions suggested a web-based retirement planning tool . Fast forward over two decades and this still hasn’t been implemented. The pensions dashboard would allow savers to view their combined pensions information online, helping to reconnect lost pension pots and better plan for retirement.
Summary
With the appointment of Emma Reynolds as the Pensions Minister in the new government, there’s a renewed sense of hope for positive changes in the way pensions are managed.
PensionBee’s VP Public Affairs, Becky O’Connor, commented : “We’re pleased to welcome the new Pensions Minister. This will be a crucial appointment, given Labour’s manifesto commitment to a comprehensive review of the pensions and retirement savings system, a measure that could potentially benefit millions of savers.”
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.