Sir Steve Webb (Image: PA)
Labour’s flagship pension laws fail to ensure people are saving for retirement, a leading pensions expert has warned. More than 12million people are failing to save enough to enjoy a happy retirement – and the Government’s new Pension Schemes Bill, published on Thursday, ignores the “elephant in the room”, according to Sir Steve Webb, a partner at pension consultants Lane Clark and Peacock and former pensions minister.
He said: “Whilst there are many worthy measures in the Bill, the biggest omission is action to get more money flowing into pensions. The Government’s own projections show that more than 12million people are not saving enough for retirement and yet the first major pensions legislation of the new Parliament does nothing to address this ‘elephant in the room’.”
The Government will consider ways of increasing contributions in the future, but Sir Steve said: “The very fact that the adequacy of pension saving is not going to be considered until the second phase of the Government’s pensions review shows that this issue is unfortunately on the back burner.
“Measures such as consolidating tiny pension pots are helpful tidying-up measures, but do nothing to tackle the fundamental problem that millions of us simply do not have enough money set aside for our retirement. With every passing year that this issue goes unaddressed, time is running out for people already well through their working life to have the chance for a decent retirement.”
Work and Pensions Secretary Liz Kendall says reforms introduced through the Pension Schemes Bill will ensure millions of people planning their retirement will find it easier to manage their pension pots and enjoy higher returns on their investments.
The Bill is designed to support working people plan for their retirement by making pensions simpler to understand and easier to manage, ensuring better value over the long term.
In particular, it will help people who have saved into multiple pension pots as they switch jobs to merge their savings into one fund, making the money much easier to manage.
The Bill also introduces a new system to show how well pension schemes are performing. This will help savers understand whether their scheme is giving them good value and protect them from getting stuck in underperforming schemes.
For those approaching retirement, the Bill will require schemes to offer clear default options for turning savings into a retirement income.
Ms Kendall said: “The Bill is about securing better value for savers’ pensions and driving long-term investment in British businesses to boost economic growth in our country.”
Chancellor of the Exchequer Rachel Reeves said: “The Bill is a game changer, delivering bigger pension pots for savers and driving £50 billion of investment directly into the UK economy – putting more money into people’s pockets through the Plan for Change.”
The Bill will require smaller defined contribution pension schemes to join forces and create “megafunds”, each with at least £25billion in assets. The measures will provide higher returns by cutting costs and ensuring funds have more freedom to invest in British industry and infrastructure, ministers say.
But industry experts expressed concern after Ms Reeves threatened to force funds to invest more in the UK if they fail to do so voluntarily.
I was in the room for Rachel Reeves’s speech – one thing stuck out the most
Chancellor Rachel Reeves speaking in Rochdale (Image: Getty)
The scene was set before the speech had even begun. Two yellow buses – one completely hollowed out – were positioned as if they had just rammed into each other.
It was as if Rachel Reeves’s speech was a car crash waiting to happen. The Chancellor arrived at the freezing bus factory in Rochdale, Greater Manchester, to announce £15.6 billion of investment across a dozen projects. Her plan is to spray cash across chunks of the Red Wall and other Labour heartlands because of the surging threat from Reform UK.
The Chancellor set out her proposals before Mellor Bus workers who at times looked like they wanted to be anywhere but there.
But Transport Secretary Heidi Alexander and Greater Manchester Mayor Andy Burnham were on hand to dutifully nod as Ms Reeves rattled off for 15 minutes while using more jargon than Treasury briefing documents on budget day.
Her boost for regional infrastructure received two attempts at an applause – but the factory had more journalists than not which meant her splashing of cash was met with little fanfare in the room.
The Chancellor confirmed for the first time that the changes to winter fuel payments – so that more pensioners get the lifeline – will come into force this year. In other words, pensioners will get the money this winter, and won’t have to wait until next year.
But those in the room were left with more questions on the issue as we still don’t know how many pensioners will be eligible.
And she signalled police will not have to make choices about which crimes they investigate following the Government’s spending review.
Senior police chiefs and Government watchdogs have written to the Prime Minister warning they will be forced to make difficult choices if spending cuts are announced by the Chancellor next Wednesday.
The thing that stuck out most? Ms Reeves’s constant refusal to rule out further tax hikes, particularly on wealthy people.
She tried her best to follow Keir Starmer’s lead by branding Nigel Farage as “Liz Truss 2.0” but I fear Labour risks sinking even further in the polls.
All eyes will remain on the Chancellor ahead of her spending review next week.
