Working for the future of savers and pensions

Whether it was the introduction of auto-enrolment, the pension freedoms or the evolution of financial guidance, it is clear that this government is not afraid to think long-term about savers and securing their future. 

We want to do more to help create the right conditions to enable consolidation to flourish

And it was that principle – that savers should feel more secure in their long-term future – that guided me and my department to recently set out ambitious new plans for the DB pensions sector.

This sector is home to the retirement savings of 10.5m members in roughly 14,000 schemes and worth £1.5tn, or around three-quarters of the UK’s annual GDP. 

While it is clear there is no crisis in the sector, despite a minority of high profile cases, we saw the opportunity to modernise and ensure the system remains fit for purpose long into the future.

A stronger regulator will protect savings

We want to balance the interests of employees and employers, and that is exactly why we set out ambitious plans to support the Pensions Regulator to be clearer, quicker and tougher. 

The path we have laid out will strengthen the powers of the regulator in its resolve to protect the majority over the reckless minority, going so far as to introduce a criminal offence for the most reckless of individuals.

The regulator is there to protect people’s savings and has already secured more than £1bn through settlements to ensure that people do not miss out on their pensions if their employer becomes insolvent.  

Quite simply, we will not tolerate reckless behaviour, and will punish any attempt by employers to avoid their responsibilities and protect those that have diligently saved through their life so that they have the secure retirement they deserve. 

We intend to adjust the existing framework – again to give the regulator the tools it needs – to reduce the risk to members’ benefits where employers are not contributing what they should be, but will retain some flexibility to ensure we support employers to sustain and grow their business. 

Options for consolidation

We also want to help reduce the burden for those employers who are unlikely to be able to afford to buy out now or in the future. Consolidation already happens in different forms, but we want to do more to help create the right conditions to enable it to flourish.

This will facilitate and support a secure environment for schemes to combine running costs, governance and long-term approaches on behalf of their members, but it is up to us to ensure that those checks and balances are in place.

Later this year we will consult widely on options, including proposals for commercial consolidation, where a private company would set up a new DB pension scheme and take over the responsibility for meeting its liabilities, before delivering changes through legislation where appropriate.      

I want to be clear that these changes will drive a stronger regulator, and modernise, rejuvenate and restore public confidence in the DB sector. We will not allow the actions of a small minority to impact the vast majority doing the right thing.

Guy Opperman is the minister for pensions and financial inclusion