Latest news with #PensionSchemesBill
Western Telegraph
21 hours ago
- Business
- Western Telegraph
Millions of workers could see £6,000 boost to pension pots
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. The Government plans to double the number of UK pension megafunds by 2030. 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. Since taking office we've delivered pay rises for over 3 million workers by increasing the National Minimum and Living Wage, and secured trade deals with key international partners. Today I spoke to the unions about our ongoing commitment to working people. — Rachel Reeves (@RachelReevesMP) May 28, 2025 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 Treasury said the schemes are expected to save £1 billion a year through economies of scale and improved investment strategies. 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. Recommended reading: '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.'
Yahoo
a day ago
- Business
- Yahoo
Will Labour's pension changes actually save you an extra £6,000?
The government says millions of workers could get a £6,000 boost to their retirement fund as a result of wide-ranging pensions reforms. On Thursday, Rachel Reeves revealed more details of the Pension Schemes Bill, which will pave the way for the creation of more so-called "megafunds" managing at least £25 billion in assets within the next five years. Earlier this month, 17 major workplace pension providers signed a voluntary agreement called the Mansion House Accord, with a view to boosting pension returns. Aviva and Legal & General are among the providers who have committed to invest at least 10% of their workplace pension portfolios in assets like UK infrastructure, property and private equity by 2030. The government says the agreement will be good news for those who have defined contribution (DC) pensions - the most common type of private pension in the UK. Here's what the reform means in real terms — and how likely it is that savers will gain a £6,000 pension boost. A defined contribution (DC) pension is a type of pension scheme where you (and if it's a workplace pension, your employer) contribute money into a personal pension pot. The money you and your employer contribute is invested by your pension provider. The value of your pension at retirement depends on how much has been paid in and how well the investments perform. Pension providers typically invest in a mix of assets, including stocks and shares (also known as equities), government and corporate bonds, property, and commodities, like gold and cash. This mix is chosen to balance risk and reward, meaning that your pension will benefit from long-term growth while also managing potential losses. Labour says the changes will benefit defined contribution (DC) pension savers by harnessing higher potential net returns available in private markets. According to the government, the signatories to the accord have said that £252 billion of assets are subject to the pledge. Helen Morrissey, the head of retirement analysis at financial services company Hargreaves Lansdown, said that while "there needs to be an element of flexibility" around the £6,000 uplift, the "increased efficiency" of the reforms looks like a positive step to boost defined contribution members' pots. She told Yahoo News: 'Markets can go up and down and this can have an impact on a member's pot. "However, these reforms look to enable schemes to invest in asset classes that were previously closed to them and there is potential for increased returns as a result. "The key to this will be access to a stream of high-quality opportunities and the government has committed to helping schemes deal with barriers that have previously stood in their way. "Increased efficiency will also help boost member pots. One of the key benefits of scale is that it enables schemes to drive down costs and the impact assessment shows this can have a material impact on the size of pension," she added. It is a combination of these increased efficiencies that will reduce pension fees, as well as the higher returns that the government has used to calculate the £6,000 figure. However, Sir Steve Webb, a former pensions minister, cautioned that the sum was "marginal at best", telling the inews that savers would need to start paying into their pensions from the age of 22 and never miss a year until retirement to potentially secure the maximum amount. When factored into the total size of the average retirement pot and how long they are used for Sir Steve said it is probably worth under £10 a week on your final pension. He added: "None of this factors in the costs of some of the other measures which they are proposing, which include creating a new process for the consolidation of micro pots, which will cost a lot of money to administer, and which will presumably increase pension costs." "They're clearly aiming to provide a 'retail' message to go alongside all this talk of multi-billion-pound pension schemes, but to be honest, this £6,000 figure is marginal at best.' The reforms enable pension funds to invest in major infrastructure projects and private businesses, which historically have delivered higher returns. The plan covers retirement savings for the majority of UK workers in two ways. Firstly, there are the 86 different local authority pension schemes, which provide for more than six million people in their retirement, the majority low-paid women. The £392bn in these schemes will be merged from eight pools to six asset pools by next March, reducing overheads and maximising returns. Local investment targets will also be agreed for local authority pension schemes for the first time, the Treasury said. Secondly, defined contribution schemes currently worth £800bn, covering millions of other private and public sector workers across the country, will also be consolidated. This will reduce management fees and operational costs, and boost savings for savers. Because of this, by 2030, the government says there should be more than 20 pension funds worth more than £25bn, in contrast to the current 10 available. While the move was agreed earlier this month, the government has now introduced a legislative back-stop, which will allow it to push through the new rules if insufficient progress is made by the end of the decade, according to the BBC. The 17 providers who have signed up are: Aegon UK, Aon, Aviva, Legal & General, LifeSight, M&G, Mercer, NatWest Cushon, Nest, now:pensions, Phoenix Group, Royal London, Smart Pension, the People's Pension, SEI, TPT Retirement Solutions and the Universities Superannuation Scheme (USS). The Pension Schemes Bill is due to be heard during this term of Parliament.
Yahoo
a day ago
- Business
- Yahoo
Government 'megafund' pension plans could give £6k boost to savers
Plans to double the number of UK pension "megafunds" by 2030 could see workers get a £6,000 boost to their retirement pot, the government has said. The UK Treasury confirmed plans on Thursday to expand the number of UK pension megafunds in the next five years. Under reforms set to be introduced through the Pension Schemes Bill, the government said that multi-employer defined contribution and local government schemes will pool to operate at megafund level, managing at least £25bn in assets by 2030. The Treasury said that evidence from Australia and Canada showed that this size enabled pension funds to invest in large infrastructure businesses and private businesses, both boosting the economy and potentially driving higher returns for savers. The government said that this would help drive more than £50bn in investment for UK infrastructure, new homes and fast-growing businesses. This comes on the back of the government's recent announcement of a new agreement, known as the Mansion House Accord, in which Britain's biggest pension funds committed to invest 5% of assets in the UK. On Thursday, the government also published the final report from its Pensions Investment Review, setting out its final policy decisions following on from feedback provided to its consultation. It said that figures from the report showed that these reforms would drive higher returns for savers, "in part by cutting waste in the system". Read more: Trending tickers: Nvidia, Salesforce, HP, Tesla and M&S According to the Treasury, these schemes could be saving £1bn a year by 2030 through economies of scale and improved investment strategies. As a result, the government said average earner who saves over their career could see a £6,000 boost to their defined contribution pension pot. That's based on its estimate that this megafund consolidation could deliver at least a six-basis-point reduction in fees, as well as an increase in allocations to "productive" assets such infrastructure projects. "We're making pensions work for Britain," said chancellor Rachel Reeves. "These reforms mean better returns for workers and billions more invested in clean energy and high-growth businesses — the Plan for Change in action." Meanwhile, deputy prime minister Angela Rayner said that the "untapped potential of the £392bn 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" In Thursday's announcement, the Treasury also said that a "backstop power [is] set to be taken in the Pension Schemes Bill to protect the interests of LGPS [local government pension scheme] members and local taxpayers where necessary by directing an administering authority to participate in a specific investment pool." According to a Financial Times report, officials confirmed that this could include specific targets to UK assets. A spokesperson for the Treasury had not responded to Yahoo Finance UK's request for comment at the time of writing. Matt Tickle, chief investment officer at Barnett Waddingham, said: "The main concern for schemes following the government's wide ranging pension announcements is the looming threat of 'mandation'. "While the chancellor's 'backstop' power – which could compel funds to back British assets – appears to have deterred that threat for now, any move towards mandated investment is a blunt tool, leaving members and society as a whole at risk of poorer outcomes." "That said, the fact that there is time gives some of the government's better policies, around planning reform, value for money and retirement pathways more space to succeed," he added. "If they do, they could generate opportunities that pension schemes will willingly invest in. Efforts to improve the flow of investable opportunities are certainly positive, however there is still an urgent need to focus on reforms rather than enforcing mandates." Helen Morrissey, Yahoo Finance UK columnist and head of retirement analysis at Hargreaves Lansdown, said: "While scale is important in delivering better outcomes for savers, it must not come at the cost of reducing competition, member choice and much needed innovation. This has the ability to really drive up member engagement with their pensions, improve decision making and boost outcomes." "It's important to pick through the detail of the report and later regulation to see how this is supported," she said. "For instance, detail needs to be fleshed out on how the transition pathway for providers looking to reach scale by 2035 will work. "If the market is to thrive, then there needs to be space for smaller, innovative providers. It's a lesson learned in the retail banking market where competition from smaller challenger banks has put pressure on larger incumbents to improve user experience and product offerings." Read more: Odds of more Bank of England interest rate cuts fall as food inflation rises UK 'bargain' stocks that have outperformed the market long-term Trump tariffs to hit UK economy next year, says IMF
Yahoo
2 days ago
- Business
- Yahoo
Labour accused of unleashing ‘stealth tax' on pensions
Labour is preparing to unleash a 'stealth tax' on pensions, critics have warned. The new Pension Schemes Bill will give the Government the power to force pension funds to invest in British assets to help spark growth. Yet critics of the reform argue the change, laid out in the Treasury's Pensions Investment Review published Thursday, risks lower returns for savers. Pension industry experts also called into question government claims that the package of reforms could leave retirement savers £6,000 better off. Tory MP Neil O'Brien called the plans 'a massive stealth tax' and said pension savers will 'get lower returns' so the Government can reduce its borrowing costs. Mel Stride, the shadow chancellor, said the move was an extraordinary overreach. He said: 'Labour is crossing the Rubicon into directing the public's savings. Pension pots are there to secure retirements, not to bankroll a government.' Last month major pension providers said they would voluntarily commit to investing 5pc of their total funds into UK assets by 2030. However, the new reserve power would go further and mandate how much of savers' money needs to go into UK plc. Experts within the industry have also thrown scorn on the plans. Tom Selby, director of public policy at AJ Bell, said the move 'puts a gun to schemes' heads and will create those mandatory targets in all-but-name'. Laura Myers, partner and head of DC pensions at consultancy LCP, said the threat of the Government telling trustees how they should invest was 'a step too far' that 'risks losing sight of the primacy of member interests'. James Carter, of investment firm Fidelity International, labelled the power to direct pension scheme investments in the future 'a concern'. Publication of the review follows the news this week that HM Revenue and Customs is exploring plans to tax pension contributions made via salary sacrifice work schemes. If implemented the changes would cost the average earner more than £500 a year in extra income tax and National Insurance – and whittle away their pension pot and their retirement potential. The Government has said that the changes within the new review will result in an additional £6,000 on average being added to an individual's pension pot over a lifetime of saving, as revealed by the Telegraph. However, Sir Steve Webb, a former pensions minister and now a partner at LCP, has said he would not 'put any weight' on the figure. He said that while lower cost pensions due to reforms could see savers add to their pots, the increase will only be marginal and there is a risk that costs actually rise, adding: 'Even the assertion that there will be overall cost savings is far from obvious.' Mr Selby added: '£6,000 isn't exactly a big potential 'gain' over the course of a retirement in return for the extra risk that is likely to be taken on. Entirely possible the gains will be higher but they could also be lower.' Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Yahoo
2 days ago
- Business
- Yahoo
Labour accused of unleashing ‘stealth tax' on pensions
Labour is preparing to unleash a 'stealth tax' on pensions, critics have warned. The new Pension Schemes Bill will give the Government the power to force pension funds to invest in British assets to help spark growth. Yet critics of the reform argue the change, laid out in the Treasury's Pensions Investment Review published Thursday, risks lower returns for savers. Pension industry experts also called into question government claims that the package of reforms could leave retirement savers £6,000 better off. Tory MP Neil O'Brien called the plans 'a massive stealth tax' and said pension savers will 'get lower returns' so the Government can reduce its borrowing costs. Shadow chancellor Mel Stride said the move was an extraordinary overreach. He said: 'Labour is crossing the Rubicon into directing the public's savings. Pension pots are there to secure retirements, not to bankroll a government.' Last month major pension providers said they would voluntarily commit to investing 5pc of their total funds into UK assets by 2030. However, the new reserve power would go further and mandate how much of savers' money needs to go into UK plc. Experts within the industry have also thrown scorn on the plans. Tom Selby, director of public policy at AJ Bell, said the move 'puts a gun to schemes' heads and will create those mandatory targets in all-but-name'. Laura Myers, partner and head of DC pensions at consultancy LCP, said the threat of the Government telling trustees how they should invest was 'a step too far' that 'risks losing sight of the primacy of member interests'. James Carter, of investment firm Fidelity International, labelled the power to direct pension scheme investments in the future 'a concern'. Publication of the review follows the news this week that HM Revenue and Customs is exploring plans to tax pension contributions made via salary sacrifice work schemes. If implemented the changes would cost the average earner more than £500 a year in extra income tax and National Insurance – and whittle away their pension pot and their retirement potential. The Government has said that the changes within the new review will result in an additional £6,000 on average being added to an individual's pension pot over a lifetime of saving, as revealed by the Telegraph. However, Sir Steve Webb, a former pensions minister and now a partner at LCP, has said he would not 'put any weight' on the figure. He said that while lower cost pensions due to reforms could see savers add to their pots, the increase will only be marginal and there is a risk that costs actually rise, adding: 'Even the assertion that there will be overall cost savings is far from obvious.' Mr Selby added: '£6,000 isn't exactly a big potential 'gain' over the course of a retirement in return for the extra risk that is likely to be taken on. Entirely possible the gains will be higher but they could also be lower.'
