Joe Dabrowski
Deputy Director of Policy, Pensions and Lifetime Savings Association
The emerging Pensions Review promises retirement improvements by looking at greater consolidation, ways to increase saver outcomes and aiming to increase investment in UK markets.
Currently, only half of workers are on track to meet the Pension Commission’s income replacement targets, and a fifth will fall short of the Pensions and Lifetime Savings Association’s (PLSA) minimum Retirement Living Standard.
Pensions and growth
The review aims to encourage more pension fund investments in UK businesses and infrastructure, as long as it aligns with pension funds’ legal duty to act in members’ best interests. With regulatory changes and well-designed incentives, pension funds could boost investments in UK businesses and infrastructure.
Value for money
Through auto-enrolment, most workers are defaulted into pensions, leading to low engagement with their schemes. This has been great for take-up of workplace pensions, but savers’ disengagement means they can be vulnerable where their scheme does not provide good value. A key goal of Labour’s Pensions Review will be to develop a framework to help assess the value all schemes offer, based on their investment performance, charges and the services and administration provided. If implemented effectively, this should ensure every pound in a pension fund delivers optimal returns.
Pensions Review could provide substantial
benefits, ensuring adequate retirement
income and financial peace of mind.
Addressing small pots
Accumulating several small pension pots as people switch from job to job poses a challenge for retirement planning. The review is likely to look closely at how best to consolidate these pots to avoid inefficiencies and lost returns. Solutions here can streamline savings and increase the amount being paid into your pension.
Pensions Dashboards
The introduction of Pensions Dashboards is another crucial development, which should be prioritised. These digital tools will allow a comprehensive overview of pension pots all in one place, making it easier to track and manage retirement savings.
Steps to better pensions
The PLSA recommends examining five key steps to better pensions as part of the automatic enrolment review:
- Setting new goals for an adequate, affordable and fair UK pensions framework
- Ensuring the state pension protects everyone from poverty and its value is maintained
- Automatic enrolment changes: over the next decade, contributions should rise gradually from 8% to 12% — evenly split between employee and employer
- Supporting under-pensioned groups like women, the self-employed, gig economy workers and others
- Enhancing engagement and outcomes in the pensions industry
Pensions Review could provide substantial benefits, ensuring adequate retirement income and financial peace of mind.
