Rachel Reeves' pension ‘megafund' reforms to bag retirees £6,000 extra each

The Sun

6 days ago

MILLIONS of people are set to receive a £6,000 boost to their pension pots, new figures reveal.
Chancellor Rachel Reeves previously announced plans to move billions of pounds of pension savings into larger "megafunds".
The scheme is aimed at boosting savers' retirement pots as well as investment in the UK.
Now Government data shows the move should boost the average earner's pension pot by £6,000 by the time they retire.
This is based on the average earner who begins saving at 22 and continues to do so until they reach state pension age.
Reeves said the pension reforms will "mean better returns for workers and billions more invested in clean energy and high-growth businesses".
The plans are some of the biggest pension reforms in decades and the Treasury has described them as "radical".
They will be introduced through a pensions schemes bill next year.
As part of the plans, the Government will consolidate - or in other words, pool together - defined contribution schemes.
Defined contribution pension schemes are a type of private pension you contribute to on a regular basis.
There are currently about 60 different multi-employer schemes, which invest pension savers' money into funds.
But the Government says that moving pension savings into bigger "megafunds" will mean they can be invested in assets that have higher growth potential.
In turn that could mean pension savers have more in their pots by the time they retire.
Australia and Canada have similar schemes that the UK is hoping to emulate.
It's estimated that defined contribution pension schemes will manage £800billion worth of assets by 2030.
The Government says the move could generate about £80billion worth of investment in new businesses and critical infrastructure.
Separately, the Government is also planning to make changes to hundreds of billions of pounds worth of assets which are currently split across 86 local government pension scheme authorities.
At the moment local government officials and councillors manage each fund.
But under the plans, the Local Government Pension Scheme in England and Wales will manage assets worth around £500 billion by 2030.
This means the pension assets will be pooled into a handful of funds run by professional fund managers.
The Government says this will allow them to invest more in infrastructure, supporting economic growth and local investment.
Jon Greer, head of retirement policy at wealth manager Quilter, previously said the consolidation could "open new doors" for UK pensions if managed carefully.
But he said its success would depend "heavily" on the availability of new infrastructure projects to invest in.
"Large funds need substantial, reliable projects to generate returns, but the market may struggle to offer enough of these opportunities, especially in the infrastructure sector," he said.
"If too much money chases too few viable investments, the effectiveness of this consolidation could be diluted, with funds potentially forced into riskier or less impactful projects."
Tom Selby, director of public policy at AJ Bell, said there is a danger as "risks are all taken with members' money".
"There needs to be some caution in this push to use other people's money to drive economic growth. It needs to be made very clear to members what is happening with their money," he said.
How do I consolidate my pension?
IF you have several workplace pensions that you're no longer paying into, you might be better off consolidating them into a single pot.
There are several advantages to this.
The first is that by having your savings all in one place, you'll only pay one set of fees.
You can also choose which pension provider you want to transfer the different savings to, so you can pick the best one for you.
It also makes it easier to keep track of your money.
You might want to move all your money to whichever of your existing pots has the best fees, or you could move it all to your current employer pension (if you have one).
Alternatively, you may wish to move money to a private pension or use a consolidator service, such as Pension Bee, Aviva, or Wealthify.
Make sure you compare and contrast your options carefully so that you're picking the best home for your savings.
You'll need to look at fees but also might want to consider the investment options available.
If any of your pots are over £30,000 you'll need to get independent financial advice, but even if you have lots of smaller pots you should consider speaking to an independent financial advisor (IFA).
You can use Unbiased or VouchedFor to find a recommended advisor near you.
Also ask whether you'll be charged a fee to exit your existing provider and to join your new provider, plus whether the age at which you can access your pension is different - for most people this is currently 55, but is set to rise to 57.
You also need to ensure the pension you're leaving doesn't come with valuable added perks, or you could lose out.
Stay alert for pension transfer scams as fraudsters often target people transferring their pension with promises of investments that are too good to be true.