Bigger and better schemes will help fill in ‘pension potholes’, says Bell

Bell was speaking at the Social Market Foundation’s pensions conference in London yesterday (10 September).

He said that, while the UK had not done a great job of reducing poverty levels overall, it had managed to reduce pensioner poverty by at least one million savers in the past 20 years.

He cited policies such as the minimum wage, Pension Credit, and automatic enrolment had been a collective “triumph”, with nine out of 10 eligible UK workers now saving into a pension.

However, the pensions minister warned that the job was only half done and the relaunched Pensions Commission  would need to work on averting a future savings crisis.

“Future pensioners will face incomes that are too low, risks that are too high and a system that is too unequal,” Bell said.

“We are on course for a world that sees pensioners being too poor, bearing risks that are too high, and living in a system that is too unequal in lots of different ways.”

Torsten Bell, pensions minister

He claimed that someone retiring in 2050 was currently on track to have an income worth 8% less than a retiree in 2025, equivalent to around £800 a year.

The Pensions Commission, which is due to publish its report in 2027, is needed to prevent worse outcomes for savers, Bell said.

“If we take a step back and look at where we are going to be, I think it’s hard not to conclude that we are on course for a world that sees pensioners being too poor, bearing risks that are too high, and living in a system that is too unequal in lots of different ways,” he said.

“Not all employees are eligible for automatic enrolment, particularly lower earners are not eligible for automatic enrolment. 

“Unemployment and savings rates for pensions among the self-employed are disastrous, and as much as 45% of the working-age population are saving nothing at any given time.”

Bell praises consolidation as Pension Schemes Bill progresses

The pensions minister also applauded the speed at which schemes were consolidating, even before new measures designed to encourage further consolidation have become law.

He said people saving into larger pension schemes would benefit from “better returns” and investment in “a wider range of assets, which will provide diversity benefits”.

“Large schemes are in a much better place to do the kind of job we need to see them do for the economy as a whole.”

Torsten Bell, pensions minister

“They’ll also have lower costs, better governance, and lots of other things that are important to us,” the minister added. “We also think that is what the British economy needs.

“Pension schemes, particularly in an economy like ours, are providing a large amount of the financial plumbing of our economy. 

“It’s the only large domestic source of capital, and large schemes are in a much better place to do the kind of job we need to see them do for the economy as a whole.”

Consolidation was also important in relation to small pension pots, Bell said. The government is currently exploring the creation of a default consolidation framework to allow deferred pots worth less than £1,000 to be automatically consolidated to help individuals keep track of their retirement savings.

Bell is currently leading the Pension Schemes Bill through parliament. It is now being scrutinised by a cross-party committee of MPs, with hundreds of amendments having been made.

Bell also addressed rumours of him receiving an expanded role in government, which is said to include work within the Treasury in the build-up to the Budget at the end of November. However, he said only that his role as a pensions policymaker meant he had to work alongside ministers in this department.