What is – and isn’t – in Labour’s Pension Schemes Bill | News

The King’s Speech at the State Opening of Parliament has outlined plans to carry forward several policies first announced by the previous government.

King Charles III gave his traditional speech this morning, setting out the government’s legislative agenda. It included plans for a Pension Schemes Bill, carrying on several policies first put forward by the previous administration.

The bill will include measures designed to help consolidate small defined contribution (DC) pots of less than £1,000 automatically, helping savers to keep track of their pensions but also reducing the number of loss-making pots that providers must manage.

The bill will also introduce a standardised value for money test, something that the Financial Conduct Authority and the Pensions Regulator have been working on for some time. This will include powers to wind up poorly performing schemes, as first proposed by the previous chancellor Jeremy Hunt in March this year.

Trustees will be required ensure DC schemes offer a default “retirement income solution”. The government said this would “improve outcomes for savers and is likely to lead to more funds being invested for longer, giving the potential for investments in productive assets – boosting economic growth”.

The outline of the bill also included explicit support for defined benefit (DB) scheme consolidation through commercial superfunds – although there was no mention of the Pension Protection Fund in this role.

The government also wants to strengthen the role of the Pensions Ombudsman to remove the need for pension schemes to apply to law courts to reinforce its rulings when recovering overpayments.

The King’s Speech also confirmed a bill that will establish the legislative framework for the new National Wealth Fund.

‘No time wasted’

Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association (PLSA), said: “We are pleased to see a pensions bill in the King’s Speech. No time has been wasted in bringing forward existing regulatory initiatives that already have the backing of industry and will improve the retirement outcomes of savers.

“Particularly welcome are the measures to require schemes to offer decumulation solutions, and the creation of DB superfunds – both key recommendations of the PLSA. It’s good to see a way forward for small pots and the value for money framework being prioritised too.”

Former pensions minister and LCP partner Steve Webb said the bill represented “business as usual” for pensions policy as it continued many items introduced by the Conservative government.

On the value for money framework, however, Webb said the measures were “unlikely to change much” in the short term as most savers were members of large master trusts rather than small DC schemes.

Steve Watson, director of policy and research at master trust provider Cushon, said the government’s intent to begin work on pension legislation quickly was “the best result savers and the pensions industry could have hoped for”.

Where was the Pensions Review?

There was no mention in the King’s Speech or the government’s accompanying documents of the Labour Party’s planned review of the pension system, which it first set out in February this year.

Eve Read, senior director of strategic delivery at Smart Pension, expressed disappointment at the omission. Current contribution levels and earnings limits meant many savers were facing inadequate pension pots at retirement, she said.

“We believe savers' futures are being impacted through the prolonged inaction in recent years,” Read said. “The expansion of auto-enrolment has already been legislated for, and we urge the new government to quickly announce its implementation.”

However, other commentators highlighted that planned enhancements to workers’ rights and protections could bring more low earners into the scope of auto-enrolment, in particular a proposed ban on zero-hours contracts.

Calum Cooper, head of pensions policy innovation at Hymans Robertson, welcomed the bill and its areas of focus but also expressed disappointment that the anticipated review was not mentioned.

“Given how important pensions are to everyone it’s disappointing to see that the pensions review, promised in the Labour manifesto, was not included in the King’s Speech,” he said.

“This is a strong start but there are some tough choices to make beyond consolidation and decumulation defaults, for example getting the self-employed saving and increasing savings levels.

“An independently led review with cross-party support would give us the best chance of providing meaningful change for a generation that will ensure sustainable pensions. We hope it will be high on the government’s agenda and included in the chancellor’s budget in the autumn.”

Simon Kew, head of market engagement at Broadstone, said the “legislative direction of travel” could “clear the way for the wide-ranging pensions review”. Areas such as tax relief, the state pension and the advice-guidance boundary could all be brought into scope of a wider review, he said, but would “benefit with from longer and considered consultations”.