With the Pension Schemes Act receiving Royal Assent on 11 February 2021, fundamental changes to the UK’s pension system are now in place. Many legal professionals have labelled the Act as one of the most significant changes to our pension system in years.
With this in mind, here’s everything you need to know about the Pension Schemes Act 2021, including what it could mean for your retirement savings.
What changes will the Pension Schemes Act 2021 bring?
One year after first being introduced to the Houses of Parliament, the Pension Schemes Act was given Royal Assent on 11 February 2021. The Act provides a wide range of legislation designed to make pensions better, safer and greener. The Pension Schemes Act 2021 covers a broad range of issues – below, we’ve summarised the key changes impacting those saving for retirement.
A new pension planning dashboard
The new pensions act will deliver a brand new pensions dashboard designed to allow savers to view their pensions all in one place. The Pensions Dashboard Programme is expected to be launched in 2023 and will feature your existing pensions along with any older schemes. The dashboard could also feature a more transparent breakdown of costs and charges.
Ultimately, the pension planning dashboard will be designed to help you see all of your pension savings in one single platform for greater control over your savings.
A new ‘hybrid’ pension scheme
The new Collective Defined Contribution (CDC) scheme is a hybrid pension scheme designed to break the barrier between Defined Benefit (DB) and Defined Contribution (DC) schemes.
The new CDC scheme will allow employers and employees to contribute a fixed rate to a collective pot, with the employee drawing income from the pot upon their retirement. It is expected that the new scheme will mean pension levels are, on average, 70% higher than a DC scheme and up to 40% higher than a DB scheme.
Pensions are going greener
Along with greater transparency and protection, pension savers will now have full disclosure over their pension investments and how environmentally-friendly they really are. The Department for Work and Pensions (DWP) believes climate change provides “a major systemic financial risk and threat to the long-term sustainability of UK private pensions.”
To combat this, the Pension Schemes Act 2021 will make disclosure of ‘climate-risk’ investments mandatory for pension schemes, giving retirement savers greater control over where their investments are going. For example, savers will be able to see if their pension scheme is investing in climate-risk activities like fossil fuels or farming, with greener options expected to become increasingly available.
Better protection for your pension savings
The Pension Schemes Act has introduced a number of ways in which pensions will be better protected moving forward. The Pensions Regulator has been given greater powers while a number of new civil and criminal offences are being introduced relating to pension plans. We expect that these improved regulations and the introduction of new offences will provide retirement savers with greater protection from pension scams moving forward.
DB pension schemes will also be better protected under the Act, helping to further protect savers from scams. Currently, pension savers can freely transfer their pension from a DC to DB scheme. However, many pension scammers use this as a way to convince savers to transfer their entire savings into illegitimate investments.
Under the new Act, pension savers will be required to provide a genuine employment link when transferring between the schemes in the hope of combating pension scams.
What to do if you’re a victim of a pension scam
While the Pension Schemes Act 2021 is set to bring about greater protection for pension savers going forward, many retirement savers have already fallen victim to financial mis-selling scams, in which they were convinced to move their savings into a SIPP when it wasn’t the right move for them. If you believe you were a victim of negligent pension advice, our team is here to help.
The FSCS has set aside £375 million in compensation costs to help victims like you get their hard-earned money back. Contact our team today to get started with your claim. Just take a look at our testimonials to see how we’ve helped other retirement savers with their claims.
Protect yourself from future pension scams with these useful resources: