The Pension Schemes Bill should be amended to include key protections for low- and middle-income workers, according to the Financial Fairness Trust.
The foundation has called for key amendments to be made to the government’s Pension Schemes Bill, which was published earlier this month.
In a new paper, Andrew Harrop – policy adviser at the Financial Fairness Trust – welcomed the bill’s intent but warned of shortcomings in its current form.
“The Pension Schemes Bill… is already an impressive piece of legislation, but it should be improved during parliamentary scrutiny,” he wrote.
He highlighted four reforms already in the bill that could benefit low earners: default retirement income solutions, small pot consolidation, new value for money requirements, and minimum scale rules for default funds.
However, Harrop said there were gaps in the government’s that could undermine the effectiveness of its plans.
Key areas for change
The government has said the bill will “transform the £2trn pensions landscape”, with Work and Pensions Secretary Liz Kendall promising to “deliver a huge boost to future generations of pensioners”.
“Outcomes for low-income savers must not be allowed to end up worse than they would have been without the government’s involvement.”
Andrew Harrop, Financial Fairness Trust
But Harrop urged consumer groups, trustees and unions to stay vigilant, especially around potential mandatory private market allocations, to ensure that the interests of low and middle earners are not sacrificed.
“Outcomes for low-income savers must not be allowed to end up worse than they would have been without the government’s involvement,” he wrote.
On default retirement income solutions, Harrop said providers should be required to include lifelong income options in any default offering. Parliament, he added, should examine whether members should provide key information before accessing their pensions, and schemes should screen out those with very short life expectancies from standard pathways.
For small pot consolidation, he argued that ministers should be allowed to set more than one upper limit, allowing higher-value pots to be consolidated in the run-up to retirement.
On value for money, the paper emphasised that reforms must result in tangible benefits for savers, not just support for economic growth. The government, Harrop said, should assess how changes affect charges, investment risk, and real-terms returns for low earners.
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The report comes amid wider scrutiny of the government’s pensions agenda, with the second phase of the adequacy review expected later this year.
Former pensions minister Steve Webb has previously warned that the bill fails to address one of the system’s most urgent issues.
“While there are many worthy measures in the bill, the biggest omission is action to get more money flowing into pensions,” he said. “With every passing year that this issue goes unaddressed, time is running out for people.”
