Wednesday, July 17, 2024 2:46 p.m
Millions of Britons are risking a poor retirement by failing to cover their pension funds sufficiently, Britain’s biggest long-term savings bank has warned in a call for sweeping government scrutiny of the pensions market.
In a statement after today’s King’s Speech, Andy Briggs, head of FTSE 100 Phoenix Group, urged ministers to launch a promised deep dive into Britain’s pensions landscape “sooner rather than later” to avert the risk of a looming crisis for pensioners.
Keir Starmer’s government has set out plans to introduce a pensions bill at the next sitting of parliament today, which will seek to deliver “better outcomes” from pension savers and “support the government’s mission to deliver growth”.
Central to the plans will be an effort to transfer more of the UK’s fragmented pension system into consolidated super funds in a bid to free up investment in a wider range of assets, the government said.
But the outline of the bill fell short of setting out a timetable for a review of the pensions landscape, as detailed in Labour’s election manifesto.
“People in the UK are at risk of thinking they’re saving at the right rate for their future when they’re not,” warned Briggs, whose firm manages around £283 billion for savers.
“Savings on the legal minimum are not enough. The single biggest lever we can pull to ensure the adequacy of savings is an increase in minimum contributions, which we would like to see the government do as part of the adequacy review,” he added.
In its pre-election platform, the government said it would launch a review of the pensions landscape to “consider what further steps are needed to improve pension outcomes and increase investment in UK markets”.
Briggs’ warnings point to a national deficit in pension funds as the population moves away from defined benefit pensions, in which savers were guaranteed a certain retirement pay, to defined contribution. [DC] schemes. Phoenix has previously warned that around 14 million savers risk retiring with less cash than they expected with DC schemes.
Ministers said today that the Pension Schemes Bill, due to be introduced at the next sitting of Parliament, could boost savers’ funds by up to £11,000.
But it will seek to achieve this by allowing savers to merge their individual pension funds and expanding the types of assets the funds can invest in, rather than raising the amount savers pay.
As part of the Bill, the Government will seek to make it easier for savers to consolidate their individual defined contribution pension funds, and a new ‘value for money framework’ will also introduce a test to ensure that defined contribution schemes deliver value.
“Value for money is another important part of better retirement outcomes. It’s good to see the focus being on the financial outcomes for savers – not just the potential benefits for UK plc,” said Becky O’Connor, fintech public affairs director at PensionBee.