DWP warned of pensions crisis as 12m workers 'not saving enough for retirement'

Labour’s flagship pension laws fail to ensure people are saving for retirement, a leading pensions expert has warned. More than 12million people are failing to save enough to enjoy a happy retirement – and the Government’s new Pension Schemes Bill, published on Thursday, ignores the “elephant in the room”, according to Sir Steve Webb, a partner at pension consultants Lane Clark and Peacock and former pensions minister.

He said: “Whilst there are many worthy measures in the Bill, the biggest omission is action to get more money flowing into pensions. The Government’s own projections show that more than 12million people are not saving enough for retirement and yet the first major pensions legislation of the new Parliament does nothing to address this ‘elephant in the room’.”

The Government will consider ways of increasing contributions in the future, but Sir Steve said: “The very fact that the adequacy of pension saving is not going to be considered until the second phase of the Government’s pensions review shows that this issue is unfortunately on the back burner.

“Measures such as consolidating tiny pension pots are helpful tidying-up measures, but do nothing to tackle the fundamental problem that millions of us simply do not have enough money set aside for our retirement. With every passing year that this issue goes unaddressed, time is running out for people already well through their working life to have the chance for a decent retirement.”

Work and Pensions Secretary Liz Kendall says reforms introduced through the Pension Schemes Bill will ensure millions of people planning their retirement will find it easier to manage their pension pots and enjoy higher returns on their investments.

The Bill is designed to support working people plan for their retirement by making pensions simpler to understand and easier to manage, ensuring better value over the long term.

In particular, it will help people who have saved into multiple pension pots as they switch jobs to merge their savings into one fund, making the money much easier to manage.

The Bill also introduces a new system to show how well pension schemes are performing. This will help savers understand whether their scheme is giving them good value and protect them from getting stuck in underperforming schemes.

For those approaching retirement, the Bill will require schemes to offer clear default options for turning savings into a retirement income.

Ms Kendall said: “The Bill is about securing better value for savers’ pensions and driving long-term investment in British businesses to boost economic growth in our country.”

Chancellor of the Exchequer Rachel Reeves said: “The Bill is a game changer, delivering bigger pension pots for savers and driving £50 billion of investment directly into the UK economy – putting more money into people’s pockets through the Plan for Change.”

The Bill will require smaller defined contribution pension schemes to join forces and create “megafunds”, each with at least £25billion in assets. The measures will provide higher returns by cutting costs and ensuring funds have more freedom to invest in British industry and infrastructure, ministers say.

But industry experts expressed concern after Ms Reeves threatened to force funds to invest more in the UK if they fail to do so voluntarily.