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Chancellor Jeremy Hunt is set to unveil sweeping reforms to the pension market to give British workers a “pot for life” as he pushes forward with an agenda to unlock retirement capital for economic growth.
At present, employers are obliged to automatically enrol eligible new staff into a retirement scheme, chosen by the company.
This requirement has resulted in tens of millions of small pension pots building up in the system, as workers move jobs and switch to their new employer’s scheme.
Measures to be outlined by Hunt in the Autumn Statement on Wednesday will give a worker the right to nominate the pension scheme that their employer pays contributions to — a similar approach taken by countries such as Australia.
“British workers deserve to get the most out of their pensions, so we will make it easier for employees to keep track of their hard-earned savings,” said a Treasury insider.
“Helping people keep the same pension pot will stop billions of pounds being needlessly lost and make sure tomorrow’s pensioners benefit from every penny they save.”
Steve Webb, former pensions minister and now partner with LCP, the actuarial consultants, said: “I think this is a terrible idea. It could lead to a fragmentation of the pension system. Lower earners risk being left worse off if they can no longer access a good value workplace pension.”
The measure — to be outlined in a call for evidence — comes as Hunt seeks to unlock tens of billions of pounds of retirement fund cash to help boost investment in the economy.
The chancellor has adopted his so-called Mansion House reforms as part of a drive to boost the amount of UK pensions savings invested in the British economy, particularly in privately held companies and fast-growing businesses.
Hunt will also announce a new “growth fund” to be established within the British Business Bank to help facilitate investment by UK pension funds into high-growth start-ups.
Meanwhile, Hunt told the CBI annual conference on Monday that his Autumn Statement would feature measures to “unlock business investment and close the gap with countries like France, Germany and the US”.
That would include a “complete overhaul of the planning system” so that companies get refunds on planning applications if they were not dealt with within the relevant timeframe.
Hunt said he wanted to “shake off some of the defeatism and pessimism” about the UK economy. One initiative would see the Treasury inject £20mn into universities to foster more “spinout” companies from research done on campus.
The Treasury said the chancellor would accept in full recommendations by an independent review — led by academic Irene Tracey and venture capitalist Andrew Williamson — on how to develop university spinouts. These include the adoption of more standardised deal terms when private investors take a stake.
Separately, shadow chancellor Rachel Reeves convened the first meeting on Monday of Labour’s “British Infrastructure Council” — including executives from BlackRock, Fidelity and HSBC — designed to shoehorn City of London cash into UK infrastructure.
Labour said the meeting, which took place at M&G’s offices in the City, discussed issues including the potential for new financing mechanisms for infrastructure to deliver “viable investment models”.
Plans for the council, which will meet every six months, were meant to be announced at the Labour party conference last month but this was delayed after senior Conservative figures intervened and told the companies involved the timing was too political.