Chancellor Jeremy Hunt has revealed that the average earners will be more than £1,000 a year better off in retirement – also increasing retirement pots by 12% – due to government plans to reform the pension industry.
The measures were set out at Mansion House where Hunt revealed that they could release as much as £75 billion from UK pension plans for investment in high-growth companies – also improving the returns enjoyed by members of retirement plans – The Times revealed.
Andrew Bailey, the Bank of England governor insists that inflation “is set to fall markedly over the remainder of the year” and that monetary tightening implemented by the Bank “is still to come through policy pipeline”.
“British pensioners should benefit from British business success. By unlocking investment, we will boost retirement income by over £1,000 a year for a typical earner over the course of their career. This also means more investment in our most promising companies, driving growth in the UK.”
What’s more, the chancellors overhaul also revealed that there is a voluntary pledge by nine of Britain’s biggest DC pension providers, including Aviva, Legal & General and Phoenix, to “invest at least 5% of the assets in their default pension funds in unlisted equities by 2030”.
Hunt’s other retirement plans disclosed that the government would start a consultation into a proposal to set local government schemes an “ambition” of doubling their existing investment in private equity by 10%.
Nigel Peaple, of the Pensions and Lifetime Savings Association, said:
“This is a complex area and it is easy to get the wrong outcomes so the government is right to propose undertaking a public consultation on all the key issues.”
Also, The Department for Work and Pensions, the Financial Conduct Authority and the Pensions Regulator will set out their plan today for a “value for money” framework for defined-contribution schemes.
“Clarifying that investment decisions should be made on the basis of long-term returns and not simply cost.
Pension schemes which are not achieving the best possible outcome for their members will face being wound up by the Pensions Regulator.”
Another area that has been considered for reform by pension experts is the “defined-benefit industry”. Hunt said:
“We will set out our plans on introducing a permanent superfund regulatory regime to provide sponsoring employers and trustees with a new way of managing DB liabilities.
For an average earner who starts saving at 18, these measures could increase the size of their pension pot by 12% over their career: that’s worth over £1,000 more a year in retirement.”