Workers could see £6,000 boost to pension pots under Government plans
Reforms in the Pension Schemes Bill propose that multi-employer defined contribution pension schemes and local government pension scheme pools operate at megafund level, managing at least £25 billion in assets within the next five years.
This could result in an investment of £50 billion in infrastructure projects, which the Treasury hopes will boost the economy and drive up higher returns for savers.
Chancellor Rachel Reeves said: 'We're making pensions work for Britain. These reforms mean better returns for workers and billions more invested in clean energy and high-growth businesses – the plan for change in action.'
The schemes are expected to save £1 billion a year through economies of scale and improved investment strategies, the Treasury said.
Under the reforms, the local government pension scheme will be consolidated, reducing the current 86 administering authorities into six pools.
Deputy Prime Minister Angela Rayner said: 'The untapped potential of the £392 billion local government pension scheme is enormous.
'Through these reforms we will make sure it drives growth and opportunities in communities across the country for years to come – delivering on our plan for change.'
Sir Steve Webb, a former Liberal Democrat pensions minister who is now a partner at consultants LCP (Lane Clark & Peacock), described it as a 'truly a red letter day for pension schemes, their members and the companies who stand behind them'.
He said: 'The Government has clearly been bold in this area and this opens up the potential for this surplus money to be used more productively to benefit scheme members, firms and the wider economy.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Daily Record
5 minutes ago
- Daily Record
UK to build up to 12 new nuclear-powered attack submarines in major defence shake-up
The UK will build up to 12 new nuclear-powered attack submarines and invest £15 billion in its warhead programme. The UK is poised to construct up to 12 new nuclear-powered attack submarines and will pour £15 billion into its warhead programme, with the Prime Minister set to disclose these plans on Monday during the Government's strategic defence review. Major investments are queued for the UK's nuclear warhead programme this parliamentary session, along with commitments to maintain the current arsenal, as supported by 62 recommendations the Government aims to fully implement. However, there's been a debate over defence spending promises, after the Defence Secretary was unable to verify if the Treasury had secured budgeting to increase it to 3% of GDP by 2034. Part of the Aukus deal with the US and Australia, the creation of these submarines is projected to sustain 30,000 highly skilled jobs into the 2030s, along with generating 30,000 apprenticeships and 14,000 graduate positions over the forthcoming decade, according to the Ministry of Defence. Defence Secretary John Healey remarked: "Our outstanding submariners patrol 24/7 to keep us and our allies safe, but we know that threats are increasing and we must act decisively to face down Russian aggression. "With new state-of-the-art submarines patrolling international waters and our own nuclear warhead programme on British shores, we are making Britain secure at home and strong abroad, while delivering on our Plan for Change with 30,000 highly skilled jobs across the country." The £15 billion investment into the warhead programme will bolster the Government's pledges to sustain the continuous-at-sea nuclear deterrent, construct a new line of Dreadnought submarines, and facilitate all forthcoming enhancements. From the late 2030s, the array of up to 12 SSN-Aukus class attack submarines – conventionally armed yet nuclear-powered – are set to succeed the seven astute class submarines that the UK anticipates commissioning. The Government, in echoing the findings of the strategic defence review, has pledged to:. - Prepare the armed forces for readiness to engage in conflict should the need arise. - Enhance armament reserves and maintain scalability in production capacities to respond promptly in times of crisis or warfare. - Procure up to 7,000 domestically produced long-range missiles, a decision projected to preserve 800 jobs within the defence sector. - Establish a pioneering cyber command while committing £1 billion towards digital advancements. - Allocate an excess of £1.5 billion for refurbishing and updating service personnel accommodation. Sir Keir Starmer is expected to declare: "From the supply lines to the front lines, this Government is foursquare behind the men and women upholding our nation's freedom and security. "National security is the foundation of my Plan for Change, and this plan will ensure Britain is secure at home and strong abroad, while delivering a defence dividend of well-paid jobs up and down the country." The Shadow Defence Secretary, James Cartlidge, expressed scepticism regarding Labour's Strategic Defence Review promises, stating that they would be viewed with caution unless Labour could demonstrate that sufficient funding would be allocated. Labour's Shadow Defence Secretary, John Healey, had previously mentioned in an interview with The Times that there was "no doubt" the UK would achieve its goal of 3% defence spending. However, when questioned on the BBC's Sunday with Laura Kuenssberg programme, he sidestepped queries about whether the Treasury had provided any guarantees for the necessary funding. Healey also acknowledged that he did not anticipate an increase in the number of armed forces personnel until the next Parliament, citing ongoing recruitment and retention challenges. When asked about the Army's target of 73,000 personnel, he replied, "We've narrowed the gap, but we've still got more people leaving than joining. "The first job is to reverse that trend and then I want to see in the next parliament our ability to start to increase the number." In response, James Cartlidge argued, "All of Labour's Strategic Defence Review promises will be taken with a pinch of salt unless they can show there will actually be enough money to pay for them. "Whereas, far from guaranteeing the funding, John Healey has been hung out to dry by Rachel Reeves. "As recently as Thursday, Healey promised that defence spending would definitely hit 3%, but today he's completely backtracked. "These submarines are not due to enter service till the late 2030s, so how can we have any confidence Labour will actually deliver them when they can't even sustain a policy on defence spending for more than 48 hours?" Lib Dem defence spokesperson Helen Maguire commented: "This signals absolutely the right intent about the need to bolster the UK's defences in the face of Putin's imperialism and Trump's unreliability. "But this must come with a concrete commitment and detail on full funding. "Labour's mere 'ambition' rather than commitment to reach 3% of GDP on defence leaves serious questions about whether the money for these projects will actually be forthcoming. "The 2034 timeline suggests a worrying lack of urgency from the Government. "Unless Labour commits to holding cross-party talks on how to reach 3% much more rapidly than the mid-2030s, this announcement risks becoming a damp squib."
Telegraph
an hour ago
- Telegraph
The Australian pensions tax trap that could come to Britain
Australia's plan to double thousands of pension tax bills could be adopted in Britain, experts fear. Under new rules put forward by Australia's government, 80,000 savers would be forced to start handing a third of their investment returns to the tax office. When approached by The Telegraph, the UK Government refused to rule out bringing the policy to Britain – which would add to a series of pension raids on farmers, business owners and grieving families. Martin Willis, of consultancy Barnett Waddingham, said it would provide the Government with quick access to revenue, while Standard Life's Mike Ambery said all options were 'on the table'. The move could be seen as a replacement for the abolished lifetime allowance. The tax charge on large pensions was removed by previous chancellor Jeremy Hunt, but Deputy Prime Minister Angela Rayner called for it to be reintroduced in a memo leaked last week. Australian pension savers must pay 15pc tax on any pension investment returns once their pot exceeds $3m (£1.4m), but the country's Labor Government – led by prime minister Anthony Albanese – is now aiming to double the rate to 30pc. It would require people to pay even higher amounts of tax on 'paper returns', where they have to physically pay a bill for investment gains they have not received in cash. Any losses are offset against future years, but previous payments are not refunded. 'Quasi-inheritance tax' The country's previous Labor government tried and failed to make the change in 2023, but the plans look increasingly likely to become law after the party clinched a surprise majority with a landslide election win last month. The move, which will raise $2.7bn (£1.3bn) in its first year alone, was branded a 'quasi-inheritance tax' by Peter Dutton, the opposition's leader, before the country went to the polls. Critics have also warned that as many Australians also hold assets like farms and small business in their pension schemes, cashflow shortages might force some owners to sell if they couldn't meet their increased tax bills. In the UK, pension investment returns are currently tax-free. But the Treasury did not rule out the move and two experts said that it would be considered. Mr Willis said: 'The Government is definitely looking to Australia and what it's done with its pensions, so they'll definitely look at this. Although the UK government gets to tax pension savings on the way out, this would allow them quicker access to the additional revenue. 'With that said, there are other options that would be more dramatic to reduce tax relief on the way in. I would not be surprised in the coming years to see something done on higher rate tax relief or National Insurance. 'The Government is looking at this because they probably would like to reduce what they're spending on tax relief. It's a lot of money.' Mr Ambery also said: 'All options are on the table. The UK looks at Australia as one comparison for pension policy, but we do things our own way. It would be logical as part of a changing environment on the pension landscape to consider this as an option. 'Tax relief and wealth distribution are highly emotive, but critical considerations economically and politically.' UK pensioners already hit by Labour Savers in the UK have already been left reeling by changes made to pensions during Labour's first year in power. In her maiden Budget, Rachel Reeves introduced a £1m cap on agricultural property relief and business property relief, meaning inheritance tax will be charged at 20pc on assets over £1m from April next year. Pensions will also be considered for inheritance tax purposes from 2027, decimating some people's death planning and leaving their grieving families facing tax bills of up to 90pc. The Government has also confirmed that the upcoming Pension Schemes Bill will give pension funds the power to force funds to invest in British assets, which Conservative MPs described as a 'stealth tax' and an 'extraordinary overreach.' Experts also fear that millions of pensions could be at risk from the Government's plans to allow firms to raid their own pension funds, with one describing it as a £40bn tax grab. Last week, HMRC also released research confirming it had examined plans to raid income tax and National Insurance relief on salary sacrifice schemes, costing the average earner more than £500 a year. A Treasury spokesman said: 'As set out in the Plan for Change, the best way to strengthen public finances is by growing the economy – which is our focus. Changes to tax and spend policy are not the only ways of doing this, and recent GDP statistics show that we are doing that. 'We are committed to keeping taxes for working people as low as possible which is why, at last Autumn's Budget, we protected working people's payslips and kept our promise to not raise the basic, higher or additional rates of Income Tax, employee National Insurance or VAT.'
Telegraph
an hour ago
- Telegraph
Labour tax raid on farmers to cost Treasury up to £2bn
Rachel Reeves's tax raid on farmers will cost the Treasury almost £2bn, analysis has found, despite Treasury claims that it could boost the public purse by as much as £1.8bn. Inheritance tax reforms due to come into force next April will cause family businesses to slash investment and jobs and lead to a slowdown in the economy, according to independent consultants at CBI Economics. Its estimates suggest that changes to business property relief (BPR) and Agricultural Property Relief (APR) will backfire and, instead of saving money, it will cost the Treasury £1.9bn by 2030. Under the changes, inherited farms worth more than £1m will be taxed at a rate of 20pc after having been shielded from the levies for decades – while a 20pc rate will also be charged on inherited business assets over £1m when someone dies. The Government has said it is expecting to raise £1.8bn from family-owned businesses and farms from the reforms by 2030. Analysis from the Office for Budget Responsibility last October said this estimate accounted for how business owners and farmers would respond to the policies, although admitted the costing had a 'high degree of uncertainty'. Family Business UK, the industry group which commissioned the research, said: 'Far from increasing tax receipts into the Treasury and stimulating the economic growth the Government is trying to deliver, the changes to BPR and APR in the October Budget achieve the opposite.' The organisation said the Government risked 'inadvertently undermining [its] mission of sustained economic growth, which we agree is an absolute necessity to deliver prosperity and improved living standards for working people'. The analysis found that more than 60pc of family businesses and farms were planning to reduce investment by over a fifth in light of the changes. Around a quarter have already cut staff. By the end of this parliament, more than 200,000 jobs are expected to be lost, the research showed. Areas including Yorkshire, the East of England and Northern Ireland are expected to be the hardest hit. Report must 'serve as a wake-up call to Treasury' It comes amid a growing backlash over the inheritance tax raid and calls for the reforms to be delayed. Charities have reported a surge in calls from distressed business-owners. In November, John Charlesworth, 78, took his own life after his family said he had been 'eaten away' by fear of the tax raid. Neil Davy, chief executive of Family Business UK, said the findings showed 'just how far-reaching, and immediate, the impact of these policy changes is'. He added: 'No industry, sector, region or parliamentary constituency will be immune... The Government must urgently reconsider these policy changes.' Tom Bradshaw, president of the National Farmers Union, said: 'This report must serve as a wake-up call to Treasury, or we face major cuts to investment and significant job losses.' Mo Metcalf-Fisher of the Countryside Alliance said: 'It would be an act of foolishness to ignore the very real and irreversible damage these changes pose to the stability of the agricultural sector.' Meanwhile, Andrew Griffith, the shadow business secretary, said: 'Labour plan to steal the futures of a generation of entrepreneurs on the back of some hooky treasury maths and a blatant breach of election promises. 'The Conservative position is crystal clear. A family business death tax has no place in a society where we celebrate risk takers and wealth creators. No if's or buts. Our first Conservative budget will reverse this damaging measure.' Separate data published on Monday showed the impact Labour's tax policies are having on the economy. Estimates compiled by former Treasury economist Chris Walker found at least 10pc of non-doms have already left the UK in the wake of Labour's crackdown. If more than 25pc of non-doms leave the UK, forecasts suggest the Treasury would start losing revenue. Analysts have suggested the crackdown on non-doms could cost the UK more than £10bn a year in lost economic growth. A Treasury spokesman said: 'Our reforms to Agricultural and Business Property Reliefs will mean three quarters of estates will continue to pay no inheritance tax at all, while the remaining quarter will pay half the inheritance tax that most estates pay, and payments can be spread over 10 years, interest-free. 'This is a fair and balanced approach which helps fix the public services we all rely on'
