The Pension Schemes Bill will tackle schemes delivering poor returns for savers, combine smaller pension pots, and create bigger and better pension funds.
DWP supports pension overhaul that could give millions of savers bonus payments
The Department for Work and Pensions has backed a pension system overhaul that could give millions of savers bonus payments from surplus cash.
The Pension Schemes Bill will tackle schemes delivering poor returns for savers, combine smaller pension pots, and create bigger and better pension funds. And savers could one day see bonus payments.
TPT Retirement Solutions, a mid-sized provider that manages £11.1bn of pension assets, said on Thursday it had secured funding to launch a DB scheme consolidator — or superfund — to complete £1bn of transactions. The TPT proposal would allow pension schemes to “run on”, rather than acting as a bridge to a buyout, and enable profits to be shared.
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“The plan is to use the surplus that arises from running the superfund to augment member benefits” said David Lane, chief executive at TPT.
“Ongoing, more dynamic sharing of value can be useful over long time periods, for example if the inflation situation changed radically” said Raj Mody, an independent pensions expert.
Lane said the amount shared with members would depend on a range of factors — including a scheme’s funding level on entering the superfund and investment performance — but that over a 25-year period “the majority of the surplus would accrue to the members”.
David Fairs, partner at consultancy LCP, said the regulator had set a “high bar” for the launch of superfunds.
He added that schemes that planned to run on “clearly have a different risk profile” than those that are a bridge to buyout.
The Pensions Regulator said it welcomed innovation “that has potential to improve outcomes for savers and provide choice for trustees”.
Speaking earlier this year, Labour Party Minister for Pensions Torsten Bell said: “We are ramping up the pace of pensions reform. Workers deserve to get better bang for each buck saved, and these sweeping reforms will make sure they do.
“Pension saving is a long game, but getting this right is urgent so that millions can look forward to a higher income in retirement.”