Changes to workplace pensions are to come, according to the chancellor, Jeremy Hunt. In a bid to create the next Silicon Valley, Hunt is set to announce new plans to merge workplace pension schemes in order to release retirement funds for startups. So, what does this mean for your workplace pension? Read on to find out.
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These new pension plans were announced to top executives and MPs at the lord mayor’s annual Mansion House dinner last week. The chancellor’s proposals are meant to mobilise investment from the UK’s £2.5tn pensions sector.
In the speech, Hunt affirmed that the government would push for consolidation of the country’s current wide variety of pension schemes, including final salary pensions. By doing this, they hope to pool their funding so they can create better returns for anyone who wants to retire in the future.
The Treasury has come to a deal with nine of the UK’s largest pension providers, including Aviva, Scottish Widows, and Legal & General to put 5% of retirement funds toward private investments. This means that future retirees would have the chance at a stake in homegrown private companies. Previously, fast-growing fintech and biotech startups have opted for foreign investors, but with this move, the government hopes to change that.
These changes are just a small part of a wider governmental push for more business investment and for the UK to be able to benefit from the success of its own businesses.
Evers since the debut of the auto-enrolment programme, compulsory workplace pension contributions have helped the UK become the largest pensions market in Europe, saving £115bn in 2021 alone. However, the chancellor believes there are still more opportunities to take advantage of, including launching these new reforms. The government estimates a 12% increase in pension returns for the average earner who starts saving at 18, all thanks to the reforms.
Dubbed the “Mansion House compact,” this initiative could release £50bn from defined contribution pension funds by 2030 if other pension schemes come aboard. Consolidation will take place over the next two years and double their investment in private equity to 10%.
To discuss how these changes will impact your pension pot, get in contact with your trusted adviser from Dental & Medical Financial Services today.