The path ahead for pensions in 2021

Pensions play a vital role in shaping the financial security of the nation and our commitment to net zero by 2050.

That’s why my focus in 2021 will be to deliver on the essential measures included in the Pension Schemes Bill to create a safer, better and greener pensions system in the United Kingdom.

Putting the consumer first is at the heart of this, and at the heart of automatic enrolment. With more than 10 million employees automatically enrolled in workplace saving since 2012, everyone accepts that it has been a great success. But that doesn’t mean we can’t make improvements.

The growth of deferred small pension pots in the automatic enrolment market is one such problem I am determined to address. A first step on the journey to achieving this was the creation of the Small Pots Working Group, harnessing opinions from across the financial services and other sectors.

The group’s valuable analysis and recommendations, published on 17 December 2020, will be considered in detail, alongside the review of the default fund charge cap and standardised cost disclosure. It is vital that costs, charges and transparency measures work effectively to protect member outcomes.

The creation of pension dashboards will help reduce the proliferation of small pots, increase transparency, and transform the way we all think about and plan for retirement. I’m encouraged by the progress made this year, and the continued collaboration driving the project forward.

I am ambitious for the future of dashboards, as a place where people can easily see what they can expect at retirement, and the value their current providers are giving them.

The bill also places greater responsibility on the government to ensure savers are protected from unscrupulous scammers, creating greater safeguards for pension savers when transferring between schemes.

Safeguarding the individual consumer, increasing engagement and offering choice are essential, but at the same time, individuals and pensions do not operate outside of the wider global context; climate change is a real financial risk to savers, and it is beholden on us all that the issue is addressed.

Climate change is expected to have a significant impact on pension schemes' assets and returns for savers, both through the risks of a warmer planet, and the transition to a lower-carbon economy.

I am putting trustees' duty to manage climate risk on a statutory footing by introducing minimum governance requirements and mandating the publication of climate-related risks and opportunities in line with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).

We will be consulting on draft regulations in the new year, and will be the world’s first major economy to do so. In addition, we are working with the Taskforce on Pension Scheme Voting Implementation, including the Association of Member Nominated Trustees to change the relationship with pension schemes’ asset managers, and improve stewardship.

The UK leads the world in its action on pensions policy and climate change, and as the country seeks to build back better following the extreme difficulties of the pandemic, the United Kingdom has a real opportunity to showcase this progressive agenda at COP26 in November 2021.

Collectively, we have accomplished a great deal in this, the most challenging of years. I am looking forward to building on these accomplishments over the next 12 months.

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