Discussing the Pension Schemes Act, Gail Izat – Managing Director for Workplace and Retail Intermediary at Standard Life, says the focus must now turn to effective consultation and successful implementation to ensure these measures translate into more secure and better retirement outcomes for pension savers.
Royal Assent of the Pension Schemes Act marks an important milestone for the pensions industry.
While recent debate has understandably focused on the Government’s proposed mandation powers, the legislation goes far beyond this single issue, introducing a series of meaningful reforms that tackle some of the unintended challenges of auto enrolment and pension freedoms.
By placing greater emphasis on scale, value for money and clearer guidance at retirement, the Act creates the conditions needed for the industry to deliver better, more sustainable outcomes for pension savers over the long term.
Guided retirement
Pension freedoms have given people greater choice and flexibility, but they have also placed more responsibility on individuals to manage longevity risk, make complex investment decisions and their income last throughout retirement.
As greater clarity emerges on the delivery of Targeted Support, the Act takes an important next step by introducing Guided Retirement Options.
These industry‑designed, ready‑made solutions will support customers who neither want to select their own investments nor seek full financial advice, by helping them to make better decisions at the point of decumulation and to avoid poor outcomes such as unsustainable withdrawals.
Crucially, there is no one‑size‑fits‑all approach to decumulation and the development of retirement income defaults should complement, rather than replace, the range of options available to those who wish to take a more active role in planning their retirement.
Small pots
The Act establishes a clear framework for the automatic consolidation of small, dormant pension pots, tackling an unintended consequence of auto enrolment and a more mobile, modern labour market.
Consolidation can deliver clear benefits for savers by reducing costs, lowering charges and making pensions easier to manage.
Larger pots can also unlock wider investment opportunities and ultimately support better retirement outcomes.
We support small pot consolidation and see an opportunity to extend its scope beyond auto enrolment to include all pension schemes.
Broadening the impact and reviewing the 2030 timeline could help unlock the benefits of consolidation earlier, delivering quicker gains for savers and supporting the industry’s journey towards scale.
Value for Money
The Value for Money framework has the potential to raise standards across the market by making schemes and default funds more comparable using a broader set of metrics, including service quality and investment performance, not solely costs and charges.
Now that the consultation period has closed, it is critical that the final framework strikes the right balance between investment outcomes and service standards, and that data requirements remain proportionate, particularly for multi‑employer schemes.
Getting this right will be essential to ensuring that large, well‑governed schemes deliver genuine value for members.
Scale and consolidation
Allowing providers to consolidate savers into their primary default funds through contractual override will accelerate progress towards the Government’s ambition of creating DC mega‑funds.
Many providers, including Standard Life, already invest at scale, but these changes will streamline default arrangements, drive efficiencies and ultimately benefit both savers and the wider UK economy.
Next steps
The Pension Schemes Act provides a platform for the next phase of pensions reform.
The focus must now turn to effective consultation and successful implementation to ensure these measures translate into more secure and better retirement outcomes for pension savers.
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