Workers on average earnings could see their retirement savings grow by up to £29,000 under landmark reforms in the government’s Pension Schemes Bill, the government has said.
The legislation, which returns to parliament for its second reading today, is designed to overhaul the pensions system by consolidating small pensions, driving down costs, and ensuring schemes deliver value for money.
These reforms are expected to affect around 20 million savers by helping them to manage their pensions more easily and avoid being stuck in underperforming schemes. Changes to the rules will also support the creation of “megafund” pension schemes worth at least £25 billion, which will be capable of investing in a broader range of assets and delivering better returns, according to the government.
Minister for pensions Torsten Bell said: “We’re ramping up the pace of pension reform, to ensure that people’s pension savings works as hard for them as they worked to save.
“The measures in our Pension Schemes Bill will drive costs down and returns up on workers’ retirement savings – putting more money in people’s pockets to the tune of up to £29,000 for an average earner and delivering on our Plan for Change.”
Jim McMahon, minister for Local Government and English Devolution, added: “This bill will ensure the Local Government Pension Scheme (LGPS) is fit for the future and harness its full potential, with assets due to reach £1 trillion by 2040, and will strengthen investment in local communities to accelerate growth as part of our Plan for Change.”
Zoe Alexander, director of policy and advocacy for the PLSA, called the legislation a “significant milestone” and highlighted its potential to cut pension costs, simplify options for savers, and ensure value for money.
The bill also includes measures to simplify retirement choices, unlock billions in surplus defined benefit pension funds, and future-proof the LGPS by consolidating £400 billion of assets into expert-managed pools.
While the reforms promise major benefits, the upcoming Pensions Review will assess how to ensure fairness across all groups and address challenges around pension adequacy.
The government estimates that a man starting his career on average earnings could see up to £31,000 more in his pension pot, while a woman could see £26,000 more.
