New pension rules in England secretly 'scrapped' by Labour in u-turn

A pension system overhaul has been secretly scrapped by the new Labour Party government in a 'pot for life' U-turn. Speaking to Politico, a Department for Work and Pensions (DWP) official shared there is currently "no active work is being taken forward" to make Jeremy Hunt's pledge a reality.

A Department for Work and Pensions official with knowledge of policy discussions, granted anonymity to speak freely, confirmed to POLITICO that “no active work is being taken forward” on former Conservative Party MP Hunt's proposal to legislate for a moveable workplace pension.

The pensions industry welcomed the demise of Hunt's pot for life. “This would have been a massive administrative hassle for employers, would have introduced considerable cost into the system and would have risked less well informed and engaged workers being left behind in potentially inferior arrangements. It’s great news that this idea has been dropped,” said Steve Webb, a former Liberal Democrat pensions minister and now partner at LCP.

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Tom Selby, director of public policy at AJ Bell, said pursuing the reforms before delivering a pensions dashboard "would have been like throwing two rocks at the same bird." “Given how many times the launch of the first dashboard has been delayed, it makes sense for the government to prioritize this rather than pushing ahead with a second project aimed at tackling the same problem that would inevitably demand significant time and resources,” Selby said.

Kate Smith, the head of Pensions at Aegon, warned: "The new ‘pot for life’ concept will give employees the ability to select their own pension provider and force their employer, as well as any future employers, to pay their employer and own employee contributions into this chosen pot.

"This could work well for a minority of higher paid employees who wish to select their own pension scheme but risks poorer retirement saver outcomes for millions of employees if economies of scale are lost. Costs are spread across scheme memberships, where those with higher pensions effectively ‘cross-subsidise’ the pensions of those with smaller pensions pots who tend to be the lower paid, enabling them to benefit from lower charges.

"Those left behind, on modest incomes, could face higher charges which means lower retirement incomes."