The recent King’s Speech has brought significant developments in the realm of pensions with the introduction of a new Pension Schemes Bill. This new legislation aims to consolidate and improve value and outcomes for members of Defined Contribution (DC) pension schemes.

Key Highlights from the King’s Speech

The King’s Speech outlined several key measures included in the new Pension Schemes Bill, focusing primarily on DC pension schemes. Here are the main points:

Consolidation of Small Pots: The Bill will include measures to consolidate small DC pension pots, making it easier for members to manage their retirement savings.

Standardising “Value for Money” Tests: New standardised tests will ensure that DC pension schemes offer good value for money to their members.

Default Decumulation Solutions: Trustees of occupational DC schemes will be required to provide default decumulation solutions to improve outcomes for savers as they transition into retirement.

On the Defined Benefit (DB) side, the Bill will introduce a statutory regime for DB superfunds, a long-awaited development in the industry.

Missing Pieces in the New Bill

While the new Bill covers significant ground, some aspects remain unaddressed:

DB Schemes and Use of Surplus: The previous Government’s consultation on options for DB schemes and the use of surplus has not been included. This indicates that these issues may require further consideration before any legislation is enacted.

Public Sector Consolidator for DB Schemes: The creation of a public sector consolidator for DB schemes is another area that has been omitted from the new Bill, likely due to the complexity, concerns raised in the industry and need for detailed analysis.

Commenting in Professional Pensions, partner Sonya Fraser emphasised the importance of the Bill’s focus on consolidation and improving value for DC scheme members: “The King’s Speech has outlined a new Pension Schemes Bill with measures very much focused on consolidation and improving value and outcomes for members of DC pension schemes. The Bill will look to take forward proposals of the previous Government on consolidation of small pots, standardising ‘value for money’ tests, and placing duties on trustees of occupational DC schemes to provide default decumulation solutions. On the DB side, it looks like we may also finally be seeing the creation of the DB superfunds statutory regime that the industry has been waiting for.”

Sonya also pointed out the notable omissions in the Bill, particularly concerning the consultation on DB schemes and the potential public sector consolidator, suggesting these areas may require more careful consideration before any legislative action.

Conclusion

The new Pension Schemes Bill represents a significant step forward in enhancing the value and outcomes for pension scheme members. With a focus on consolidation and standardised VFM tests, the Bill aims to improve the pension landscape for DC members. However, the absence of certain measures indicates that there is still work to be done.

To read the full article and Sonya’s complete commentary, please visit here.

Sonya’s comments were also published in Compliance Week, here.