Pensions updates | July 2024

The new Labour government and pensions

On 20 July 2024, the new Labour government has announced the launch of a wide-ranging review of the UK pensions industry to be led by the new joint Treasury and Department for Work and Pensions Minister, Emma Reynolds MP.

The review has the ambition “to boost investment, increase pension pots and tackle waste in the pensions system.” It was first announced in the Labour Party’s pre-election manifesto and the pension industry is pleased to see this being carried through post-election.

The review will focus on investment and include collaboration with the Ministry for Housing, Communities and Local Government (MHCLG) to “unlock the investment potential of the £360 billion Local Government Pensions Scheme” (LGPS) including “how to tackle the £2 billion that is being spent on fees.” The first stage of the review will also be looking at ways to generate “greater productive investment and better retirement outcomes.” This is expressed as including further pension consolidation and encouragement of “at-scale” schemes to increase returns through “broader investment strategies.”

The new Pensions Minister said, "Over the next few months, the review will focus on identifying any further actions to drive investment that could be taken forward in the Pension Schemes Bill before then exploring long-term challenges to ensure our pensions system is fit for the future.”

Kicking off the review, the Chancellor of the Exchequer, Rachel Reeves MP, and the Pensions Minister chaired a roundtable with the pensions industry on 22 July 2024 to start “intensive industry engagement.”

While the first phase will focus on investment, the next phase is stated to start later this year and consider further steps to “improve pension outcomes and increase investment in UK markets, including assessing retirement adequacy.”

This follows closely on from the King's Speech, which was delivered to Parliament on 17 July 2024. Here we heard the announcement that a Pension Schemes Bill will be brought forward by the new Labour government. According to background briefing notes published by the government, the Bill will build on several measures initiated by the previous government under its Mansion House Reforms and will include provisions that:

• Provide for the consolidation of deferred small pension pots.
• Introduce a standardised value for money framework for trust-based defined contribution (DC) schemes. The FCA will introduce rules applying the framework to contract-based DC schemes.
• Impose a new duty on trustees of occupational pension schemes to offer guided retirement products to members, including "a retirement income solution or range of solutions" and "default investment options".
• Consolidate the defined benefit market through commercial "superfunds".
• Reaffirm the Pensions Ombudsman as a "competent court" for the purpose of section 91 of the Pensions Act 1995, removing the need for pension schemes to apply to the courts to enforce Ombudsman determinations in relation to the recovery of overpayments.
• Amend the rules governing the Pension Protection Fund and Financial Assistance Scheme to extend the definition of "terminal illness", allowing eligible members to receive a lump sum payment at an earlier stage.

The measures are intended to develop a private pensions market that "encourages consolidation and focuses on value and outcomes for members" says the government.

For further information on plans for pensions under the Labour government, or for support on any other pensions related matter, please get in touch with Céline Mather-Franks.