In November the Chancellor made several announcements in the Autumn Statement that could impact the UK’s pensions savings. Our expert Pete Glancy, Head of Policy, Pensions & Investments, has been reflecting on what was said by the Chancellor and in other very recent announcements.

Pete Glancy
Head of Policy, Pensions & Investments at Scottish Widows
10 January 2024
4 min read

More pensions choice for UK workers

The UK Government is exploring the possibility of people being given the ability to choose their own workplace pension. Now, the way it works with auto enrolment is that the employer picks a pension scheme for the entire workforce, into which both the employee and employer contribute. 

If an individual employee doesn't want to be in that pension scheme, they can opt out. They’re then welcome to set up their own private pension, but they wouldn't necessarily get those valuable employer contributions paid into anything other than the scheme that’s been chosen by the employer. 

The government consultation is asking whether individual employees should be given the right to select their own pension product, and require that both employer and employee pension contributions are paid into that. The government is concerned that a ‘race to the bottom’ on price, means that better performing investments have had to be excluded, and wants to give individual employees the ability to access schemes where the overall Value for Money (VfM) may be better.        

Technology needs to catch up

The way that auto enrolment it set up right now means that employees choosing their own pension simply isn’t practical - or logistically workable.  For example, there's a lot of software within the payroll industry which speaks to  software in the pensions industry, that was built around the time of auto enrolment. It's not currently geared up to support individual people picking their own pension. The technology needs to be updated and tested end to end with the pensions industry before this option could be introduced.  

Increased pension scam risk:

Allowing people to pick their own pension provider could also increase their vulnerability to scammers, or subject their pension savings to products which offer poor value for money. Currently, auto enrolment pension providers need to set up their products within very tight constraints. However, these same constraints don’t apply to retail pensions, which could expose their pensions savings to very high charges, or complicated and risky investments which have the potential to go badly wrong.

To mitigate those risks, the government might limit the range of schemes/providers to a small, approved number of arrangements which have been successful in applying to the government to perform that role. Successful applicants will likely have to demonstrate that they are fit and proper, that they have the necessary operational and financial resources, and that they have the appropriate scale to deliver Value for Money. The Chancellor’s ambition is that by 2030 everyone should be auto enrolled into a scheme which is at least £30 billion in size.


"The Chancellor’s ambition is that by 2030 everyone should be auto enrolled into a scheme which is at least £30 billion in size."

Introducing stapling

Whilst giving members the right to choose will contribute to a reduction in the number of small pension pots which are being accumulated as people move between many jobs during their careers, it’s likely that only around 20% of workers will select a pension which they will take with them from job to job.    

The government is exploring the idea of ‘stapling’ which operates in Australia. Under ‘stapling’ those workers who haven’t chosen a lifetime provider, will have all future pension contributions stapled to their current pension scheme when they move jobs. Only workers starting their first job would be auto-enrolled into the default scheme operated by their current employer.

These proposals are at odds to the government’s ‘small pots’ initiative which will see small pots following the employee to their next employment. It wouldn’t make sense to have small pots following the employee forward and future contributions (under stapling) flowing in the opposite direction. It is likely therefore that the current ‘small pots’ proposals would operate only as an interim arrangement until the introduction of stapling.

There is much to be worked through, as at this stage, these are only proposals being explored by government.

"It’s likely that only around 20% of workers will select a pension which they will take with them from job to job."

Default decumulation options

The next thing to mention from the Autumn Statement was the announcement on decumulation – which is when someone takes money out of their pension. At the moment it's quite common, in retail and personal pensions, for someone to accumulate money into a product and then decumulate – take it back out – of that same product. However, in occupational pensions which are supervised by the Pensions Regulator and run by trustees for a workforce, it's never been a requirement for trustees to offer decumulation options and support to scheme members. 

But the Department for Work and Pensions (DWP) is very keen that trustees make good value decumulation options available to people.

The government have stipulated that there must be a default solution for people who don't want to shop around at the point of retirement and that the default needs to reflect the make up of the particular workforce. Trustees will have the flexibility to partner with third parties to provide decumulation options, including the default, or they could choose to build that into their scheme. Solutions could be built around annuities or income drawdown, and there may be further product innovation offering increased choice in the future, including something known as Collective Defined Contribution (CDC).     

But the challenge is going to be that the average person has 11 jobs during their career, which means they'll have 11 pots with different employers who each have different defaults. This is going to be extremely confusing for people at retirement and in some cases quite unhelpful in terms of their retirement plans. It’s likely to increase the desire from people to consolidate all of their pension pots before reaching retirement age in order to avoid those challenges.

ISA reform

Whilst there was some reform of ISAs, including the ability to have more than one ISA in a single year, we didn’t see the combining of Cash ISAs with Stocks and Shares ISAs. We also didn't see the introduction of a ‘Brit ISA’, with extra rewards for those who were primarily investing in ways which are beneficial to the UK economy. There could be more developments on this on the 6 of March.


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21 March 2023 | Andy Bickers 

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Value for money

Announced close to – rather than in - the Autumn statement was the FCA’s consultation on a new value for money framework. This consultation is coming in Spring. Whilst the consultation will be managed by the FCA, the Pensions Regulator has written to the trustees and sponsors of Occupational DC schemes advising them to contribute actively in the consultation process, as the outcome will apply to them in the future too.  

The FCA wants to move the focus in workplace pensions away from price and onto value. Employers and those who advise them have selected schemes and providers based primarily on price, and the government believes that scheme members could be experiencing poor value as more expensive and better performing investment asset classes have been squeezed out.      

We already know a lot about the new Value for Money (VfM) framework, through announcements made in July 2023 – but much of the detail at that point was still missing. There are now four industry working groups, co-operating with the government and regulators to fill in the remaining gaps in the proposals, covering areas such as i) charges, ii) investments, iii) administration and communications and iv) how all three are brought together to determine the overall level of VfM.    

The output of these groups will be incorporated into the work published in July 2023 to form a consultation on specifics of the new framework, due to be published in the spring.

Productive Finance Initiative

The chancellor said that he wants everybody who's in a workplace pension by the year 2030 to be in a scheme that’s at least £30 billion in size. At present there are only a handful of schemes of that size and its unlikely that any traditional occupational DC scheme attached to a single employer could achieve that scale by 2030. 

Although the Chancellor didn’t say how this would be achieved or set out a roadmap, it’s likely that implications of the pot consolidation agenda and the new value for money framework will lead to a very significant contraction and consolidation of pension schemes and providers, with the only remaining providers supporting i) small pot consolidation, ii) member choice and iii) stapling, all in a way which is deemed to offer great Value for Money.    

Auto enrolment

Last year a private members bill was approved by Parliament which requires the government to reduce the age at which people are auto enrolled from age 22 to age 18. The Bill also requires the government to amend the way in which some employer’s calculate pension contributions, so that their contributions are based on more of their earnings.       

There’s going to be a consultation from DWP on the technical aspects of implementing these changes including how and when. This will then be followed by a much broader consultation on auto enrolment, which will explore how we get more people to an adequate level of retirement savings, but might also consider whether the auto enrolment ecosystem could be extended to help people accumulate a rainy day fund.  


About the author Pete Glancy

Head of Policy, Pensions & Investments at Scottish Widows

Pete is the Head of Policy, Pensions and Investments at Scottish Widows, part of Lloyds Banking Group's Insurance, Pensions and Investments division.

Pete has worked at Lloyds Banking Group for 31 years, holding a wide range of senior positions, including Head of Individual Pension Propositions and Head of Workplace Pension Propositions before taking on the pensions policy brief 6 years ago.

Pete is on the Pensions Panel at the CBI, and the Strategy Council at TISA in addition to numerous industry and trade body working groups.

Follow Pete on LinkedIn.

Pete's background Read less

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