The reforms include a £1,000 ‘rule’ for smaller pension pots.
UK households face new pensions ‘£1,000 rule’ being introduced by government
A new pensions £1,000 rule is set to be introduced for savers by the Labour Party government. A shake-up from the Labour Party government plans to secure higher returns for savers – and the reforms include a £1,000 ‘rule’ for smaller pension pots.
Labour Party work and pensions minister Torsten Bell said: “The case for this focus is clear, those retiring in 2050 are currently set to do so with lower private pension income than those retiring today.”
The Pension Schemes Bill aims to provide pension schemes with a wider range of assets to invest in and will allow some to transfer to so-called “superfunds”.
READ MORE Car tax rule change for all disabled drivers in England from April 2025
Under the reforms, the local government pension scheme (LGPS) will be consolidated, reducing the current 86 administering authorities into six pools.
Additionally, small pension pots worth £1,000 or less will be brought together into larger pension schemes. The legislation was passed at third reading on the nod and will go to the House of Lords for further scrutiny.
This new initiative will tackle what the government described as the growing problem of small, forgotten pension pots that many people accumulate as they move between employers over their working lives.
There are now 13 million of these small pots, holding £1,000 or less, with the number increasing by around one million a year.
Mr Bell, who is also a Treasury minister, had earlier said he recognises “the impact of recent years’ high inflation on the value of some pensioners’ retirement incomes”.
“But I also want to be straightforward with the House that we do not support retrospectively changing scheme rules,” he added.
Mr Bell said legislation will be brought forward “to develop statutory guidance for the trust-based private pensions sector”.
Conservative Party shadow Treasury minister James Wild said this power was “fundamentally wrong” and pressed the Government to produce a report on why it was needed.
Mr Bell described the power as a “backstop”, adding: “We do not currently anticipate it will need to be used, and this is precisely because of the industry’s commitment to the Mansion House Accord.”