“There's more that we can do to help and my plans for reform focus on three pillars, increasing fairness, adequacy, and predictability.”
On fairness, if a scheme is underperforming and the member doesn't know about it, they could be losing out on thousands of pounds.
“Bringing fairness to the new system is the first pillar of my vision for pension,” she said. “All savers deserve to be confident but their pension scheme is working hard on their behalf and on track to deliver fair and predictable outcome.”
The consultation, which has been jointly developed by The Pensions Regulator and the FCA, imposes a framework that will increase transparency, comparability and drive competition across the pension market.
It aims to deliver long term value for hardworking savers and it proposes giving the regulator the powers they need to tackle underperforming schemes.
“To help boost returns, I also remained committed to opening up the scheme’s investment to illiquid assets,” she said.
On adequacy, Trott explained that auto-enrolment has created a record number of savings and assets in the defined contribution pension system.
Both the number of participants and the size of pots are growing everyday, however that is not guaranteed to give members “an adequate income” in retirement.
“The success of AE was coverage and it gives us the foundation to begin to solve this adequacy issue,” she said.
“But everybody- I don't just mean ministers, I mean trustees, employers and individuals - need to do more. And that's why we must go further and expand the model of automatic enrolment.
“Today I'm also announcing that we will address another challenging legacy of AE introduction, the challenge of deferred small pots.”
As part of the reforms, the DWP has narrowed down the solution to the small pots issue to either the creation of default consolidators or the introduction of pot-follows-member legislation.
The two models proposed are a further step from the last report of Small Pots Co-ordination Group - jointly convened by the Association of British Insurers and the Pensions and Lifetime Savings Association — which in June recommended three potential solutions to the issue.
sonia.rach@ft.com
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