Stay informed with free updates
Simply sign up to the Pensions industry myFT Digest — delivered directly to your inbox.
Poorly performing pension plans will be banned from taking on new business as part of a major shake-up of Britain’s £120bn workplace retirement market, under government plans unveiled ahead of next week’s Budget.
Chancellor Jeremy Hunt on Saturday announced measures aimed at improving returns for millions of retirement savers by forcing pension funds to publish data comparing their performance to rivals, a requirement introduced successfully in Australia.
The Pensions Regulator (TPR) and Financial Conduct Authority (FCA) would have “a full range of intervention powers” to deal with poorly performing pension funds, the Treasury said. Those powers could include a ban on funds taking on new business from employers.
The pension reforms are part of Hunt’s efforts to stimulate the economy and will include a requirement for so-called defined contribution pension funds to disclose from 2027 how much they invest in the UK.
“We have already started on a path to drive growth, unlock capital for our most promising companies and improve outcomes for savers — and these new rules mean employers and savers can see how their money is invested and how the returns compare to other schemes,” Hunt said.
“British pension funds appear to contribute less to the UK economy than international counterparts do as they invest less in our domestic businesses. These requirements will help focus minds on how to improve overall returns and outcomes for savers.”
Nausicaa Delfas, chief executive of The Pensions Regulator, said with more disclosure helping to spark competition between schemes, and enhanced powers to crack down on poor performers, “we can really deliver for savers, now and in the future.”
Yvonne Braun, director of long-term savings at the Association of British Insurers, welcomed the plans to compare the performance of pension providers. She said that “focusing the pension system on value rather than cost alone will be hugely beneficial for savers.”
Membership of workplace pensions has grown by more than 10mn since reforms requiring employers to automatically enrol staff into company retirement plans came into force in 2012 with around £116bn invested annually, according to government estimates.
The Treasury said it was introducing the disclosure requirement for UK investments because inconsistent reporting by defined contribution pension funds was “sometimes making it difficult for policymakers and savers to understand where this money is invested.”
So-called defined benefit pension funds are already subject to disclosure requirements on their asset allocation.
Further details of the proposed reforms will be set out in a consultation by the Financial Conduct Authority later this year.
The FCA has been resistant to some aspects of Hunt’s disclosure requirements because there was no evidence that consumers or markets were being harmed by the absence of such disclosures, the Financial Times reported earlier this week.
Nigel Peaple, spokesperson for the Pensions and Lifetime Savings Association, the workplace pension trade body said: “Investment must be in the interest of pension savers and we look forward to working with the government and the FCA on defining the right benchmarks.”
Additional reporting by Ian Smith
