Small pot consolidation, value for money and pension products that delivered growth for savers, were among the commitments made by the pensions minister Emma Reynolds.
Reynolds was addressing the Pensions and Lifetime Savings Association’s annual conference in Liverpool this week (October 15).
Reynolds, MP for Wycombe, had been at the International Investment Summit the day previously.
She said: “Our priority is to unlock the true potential of the UK’s £2tn pensions industry”.
Reynolds said one of her aims would be to make sure pension funds help to grow the economy by investing in UK productive assets and “homegrown businesses of all sizes”.
Reynolds is the first joint pensions minister to work across the Treasury and the Department for Work and Pensions (DWP).
She said her dual role would help to break down the silos that have all too often prevented effective reform in the past.
Focus on pension assets
Reynolds outlined three key measures which could boost the pension pots of over 15 million savers.
The first was the consolidation of small pension pots. “This reform will improve value for savers and remove costs from the system and also support investment opportunities.”
Second, Reynolds said a value for money framework for defined contribution (DC) schemes would drive up standards and drive greater consolidation across the industry.
“It will also contribute to economic growth and pension pots by promoting an increased focus on assets that could deliver long term value.”
The third measure would be around the evolution of retirement products and the development of a default solution.
“All too often I hear that when people reach retirement age, that is when they face these very difficult decisions about what to do with their savings.
“We will include a default solution, which will be mean more funds are invested for longer, with the potential for greater investment in growth assets and better outcomes for savers on defined benefit schemes through super funds. The bill will also improve outcomes for members of closed DB pension schemes who are at risk if an employer becomes insolvent.”
Canada and The Netherlands
Reynolds also mentioned super funds and plans to extend the current offering of collective defined contribution (CDC) pension schemes to more employers.
“We have been inspired by those countries already using these schemes, looking to Canada and The Netherlands, where we see funds from pension contributions are invested into a wider range of assets like infrastructure startups and private equity, which can boost returns and benefit the wider economy.”
The minister also apologised for rushing the pensions review and welcomed the 200 industry responses to the government’s call for evidence, which had asked questions about DC and LGPS (Local Government Pension Scheme) funds investing in the UK.
“We're working through these responses now and will publish the interim findings of phase one this autumn, with the final recommendations next year.”
She said phase two of the review will look more widely at further long term steps needed to improve pension outcomes, including the extension of automatic enrolment to younger and low income workers.
