The Pension Schemes Bill has been introduced in parliament today, with chancellor Rachel Reeves describing its wide-reaching reforms as a “game changer” for the sector.
The bill includes plans to relax the rules around releasing surpluses from defined benefit (DB) pension schemes, to drive consolidation and scale among defined contribution (DC) master trusts, and to improve value for money.
Default decumulation strategies, superfund legislation and Local Government Pension Scheme (LGPS) pooling are all also covered by the bill, which was formally announced this morning (5 June).
‘Game changer’: Pension Schemes Bill laid before parliament
Find out more about what the Pension Schemes Bill contains, as the government sets the stage for a wide-ranging and ambitious overhaul of workplace pensions in the UK. Read more
The bill’s passage through parliament could take several months as its various aspects are scrutinised and amendments are debated.
As David Saunders, senior partner at Sackers, explained, this process is “a long and winding road, and there could be several twists and turns along the way”.
“With detailed regulations to follow in many cases, there is therefore still a lot of ground to cover before the bill’s provisions reach their ultimate destination as law,” Saunders said.
“The scale of some of the changes, coupled with ambitious government timescales, means that the pensions industry should take a collective deep breath to ready itself for the weeks and months ahead.”
Sophia Singleton, president of the Society of Pension Professionals, said the bill “creates the foundation for changes that should positively impact members, sponsors and trustees” – but emphasised that the sequencing of changes will be crucial to the success of the reforms.
“We will support policymakers with the considerable work that lies ahead to develop the regulations and guidance that must underpin and deliver these initiatives,” she added.
David Brooks, head of policy at Broadstone, agreed, adding: “Bringing today’s reforms together and executing on the promise they have will be a huge challenge and the industry will be looking for a clear plan and timeline from the government to achieve this.
“There’s a huge amount of change here, with many interconnections, which will require several years of careful planning and implementation.”
Steven Cameron, Aegon
“If we consider these changes to the way providers build their default accumulation and decumulation products then, alongside the incoming pensions dashboard regime, this is likely to be a memorable bill.”
Steven Cameron, pensions director at Aegon, described the bill as “blockbuster” and said it could herald “a brave new world of workplace pensions”.
“The real litmus test must be to make sure the changes deliver tangible benefits for the millions of individuals saving for retirement,” he added.
“There’s a huge amount of change here, with many interconnections, which will require several years of careful planning and implementation.”
Sankar Mahalingham, managing director of LawDeb Pensions, said the bill would require scrutiny to ensure it delivers “real benefits to savers”.
“Schemes need to ensure the interests of their members are the centre point of any decisions, which is why it’s positive to see that the government will challenge schemes delivering poor returns,” Mahalingham said.
“However, while the creation of ‘megafunds’ may be an effective way to lower costs and streamline asset options, the government must ensure that, at its core, this is a driver for increased performance for savers – and not, as may be thought by some, just another tool to serve their agenda for economic growth.”
‘A pivotal moment’: Industry leaders welcome Pension Schemes Bill
Nausicaa Delfas, chief executive, the Pensions Regulator: “The Pension Schemes Bill is a once-in-a-generation opportunity to address unfinished business in the UK pension system.
“Making sure all schemes are focused on delivering value for money, helping to stop small, and often forgotten pension pots forming, and guiding savers towards the right retirement products for them, will mean savers benefit from a system fit for the future.
“We have long advocated for fewer, larger well-run schemes with the size and skill to deliver better outcomes for savers. As such we are also pleased to see the proposed legislative framework for DB superfunds, providing options and choice in defined benefit consolidation.”
Patrick Heath-Lay, chief executive, People’s Partnership: “This is a pivotal moment in pension reform. The bill contains many measures that will require providers to deliver better outcomes for savers and improve the workplace pension system.
“These reforms must prioritise savers, and we look forward to participating in a constructive dialogue with government on how all the measures in this bill can be implemented to achieve this, while continuing the success story of automatic enrolment.”
David Lane, chief executive, TPT Retirement Solutions: “The Pension Schemes Bill represents a signal of intent, laying the foundations for a more coherent and sustainable pensions system, focused on improving outcomes for members. In drawing together several policy threads that have been under discussion for a long time, the bill is a comprehensive step forward for the industry.
“It’s particularly encouraging to see the government give renewed focus to the reform of DB schemes, following an initial focus on DC.”
Yvonne Braun, director of policy for long-term savings, Association of British Insurers: “This wide-ranging bill is set to usher in the most large-scale pension reforms since auto-enrolment. The details will be crucial and we will scrutinise the bill to ensure it puts the interests of savers first.”
Patrick Luthi, chief executive, Now Pensions: “[We] have been campaigning on small pots for a number of years, and we are pleased to see measures to deliver the ‘multiple default consolidator’ solution included in the bill.
“Measures to support members at retirement are welcome – but it’s vital that they work for all member segments, and that the risks of placing members into default solutions are addressed.
“We look forward to seeing the details which will be crucial to supporting members in an efficient way.”
