Pensions Minister Laura Trott has said she is united with the Chancellor in “creating a pension market which delivers for savers”.
Speaking at an event in Westminster on Tuesday, Ms Trott said: “The Chancellor and I are united in our commitment to creating a pension market which delivers for savers, one that is boosted by investment in innovative UK businesses and a broader class of productive assets.”
Ms Trott was speaking after Chancellor Jeremy Hunt delivered his Mansion House speech on Monday.
Mr Hunt promised a £1,000-a-year pensions boost to the average earner with reforms to get pension funds making riskier investments in high-growth firms.
He said there is a “perverse situation” in which UK institutional investors are not putting as much money into UK start-ups as their international counterparts, and hailed an agreement with leading pensions firms to put 5% of their investments into early-stage businesses in the fintech, life sciences, biotech and clean technology sectors by 2030.
The changes could help increase the retirement savings of a typical earner who starts saving at 18 by 12% over their career, or more than £1,000 more a year once they stop working, according to the Chancellor.
Ms Trott outlined on Tuesday how a range of measures should help to improve outcomes for pension savers.
She said the Government intends to legislate, when parliamentary time allows, to introduce a “comprehensive solution” to address the small pots that some employees accumulate when they switch jobs.
Ms Trott said: “I am proposing that eligible DC (defined contribution) pension pots worth £1,000 or less will be consolidated into a handful of schemes.”
She said that a “central clearing house” would be needed to facilitate the policy.
Ms Trott continued: “Over the last decade, we have rightly focused on the accumulation or building up phase of a saver’s journey.
“However, at retirement people have to make a choice about where they want to put their money to give them a retirement income – and I want there to be a wider choice, with more guidance for people who don’t engage despite the help available to them to do so.”
Ms Trott said around half of pension savers accessing their pension take the first decumulation (the process of converting pension savings to retirement income) option proposed to them by their scheme.
She said a consultation explores the development of an option for a suite of decumulation products that schemes would be required to offer.
Ms Trott added: “I am particularly interested in how this could include new approaches.”
Referring to the reforms brought forward by the Government, Ms Trott said: “I am proud to be driving this significant step forward in the creation of a system that will deliver better, fairer, more predictable pensions, that are invested in the fantastic opportunities this country has to offer.”
