Pensions in the 2023 Autumn Statement

What matters

What matters next

Chancellor Jeremy Hunt delivered the Autumn Statement on 22 November 2023. In total, it contained 110 proposed measures for delivering UK growth.

From a pensions perspective, the focus was on consolidation of the UK pensions industry through:

  1. Taking forward the Mansion House reforms, starting with steps to increase consolidation within the UK pensions industry.
  2. Supporting the establishment of investment funds for use by pension funds, which will include using the LIFTS competition, and opening the Pension Protection Fund (PPF) as an investment vehicle for some defined benefit (DB) schemes.
  3. Consulting on a new legal right for individuals to require their new employer to contribute to their existing pension pot, thereby creating a so called “pot for life” system.

These measures, the Chancellor stated, have the potential to unlock £75 billion of financing for high growth companies by 2030 and provide an additional £1,000 a year in pension income for the average earner.

The Government also confirmed that it will honour its commitment to the state pension triple lock in full. From April 2024 the new state pension will increase by 8.5%, providing pensioners with up to £900 more per year.

Consolidation

The Government has made it clear that consolidation of the pensions industry is one of its key policy aims. It has featured in a number of consultations this year alone, most recently following the Mansion House speech in July, in relation to helping defined contribution (DC) savers understand their pension choices, the proposed value for money framework (in conjunction with the Pensions Regulator and the Financial Conduct Authority) and ending the proliferation of deferred small DC pots.

The Autumn statement confirmed that consolidation remains high on the Government’s agenda, with the Chancellor confirming that its aim is for the “the majority” of DC savers to have their pensions managed in schemes with assets of over £30 billion by 2030. For context, NEST, which has around 12 million members, had £29.6 billion in assets under management as of 31 March this year

The Government’s consolidation plans don’t apply to DC alone. It is also looking at consolidation options for DB schemes, including a permanent regulatory regime for so called DB super funds (which the Government has already committed to taking forwards). It issued a call for evidence on options for DB schemes on 11 July, which asked, amongst other things, for views on the role of a potential public consolidator in the buyout market (with the PPF being proposed as a potential candidate). The Government published its response to the call for evidence shortly after the Autumn Statement was read in parliament, which concluded that there was no consensus on the point, and that concerns were raised over funding positions and regulatory safeguards. 

Despite the concerns raised, the Chancellor confirmed in his speech that the PPF would be opened up as an investment vehicle for “smaller” DB schemes, and the call for evidence response confirmed that the Government intends to establish a public sector consolidator by 2026, focussing on schemes that are “unattractive to commercial providers”. The PPF has confirmed that it welcomes the Government’s proposals and will work alongside it and other industry partners in the coming months to design the new vehicle. A consultation is expected sometime “this winter”.

Long-term Investment for Technology and Science (LIFTS) competition

The Government plans to use the LIFTS competition to ensure that all schemes have access to a wide range of investment vehicles that enable them to invest quickly and effectively in unlisted high growth companies.

The LIFTS competition is operated by the British Business Bank. It seeks proposals from the DC industry on the establishment of new investment vehicles to crowd-in investment from institutional investors, particularly DC pension funds, to the UK’s most innovative science and technology companies. Proposals that meet the LIFTS objectives (unlocking UK institutional investment, catalysing investment into UK science and technology, and stimulating the UK venture capital ecosystem) and deliver value for money will have access to financial support of up to £250 million from the Department for Business and Trade and the Treasury.

The deadline for proposals was 28 July 2023 but successful candidates have not yet been announced. 

Pot for life

Of particular note was the Chancellor's announcement that the Government will consult in relation to a new “pot for life” plan whereby individuals will be given the right to require their new employer to contribute to their existing pension pot (rather than their new employer’s designated scheme). 

The possibility of pot for life was raised in the Government's consultation on ending the proliferation of deferred small defined contribution (DC) pots back in July. That consultation related to the introduction of a multiple default consolidator model to bring down the number of small pots. At the time, the Government acknowledged that in the longer term we would need a simpler workplace saving model to deal with the fundamental issue that new pots are created each time starts a new job, so no matter how many you consolidate, the problem doesn’t go away. 

Pot for life was suggested in the consultation as a possible solution. At the time however, the Government said “it is right we focus now on delivering this solution to the small pots issue we face as no matter what the future of workplace pension saving holds it is essential deferred small pots are consolidated to the benefit of schemes and most importantly members”, suggesting that pot for life was not a priority for the Government in the short to medium term. 

However, the Government published its response to the July consultation within hours of the Autumn Statement, together with a call for evidence on the long-term direction of workplace saving which seeks views on a lifetime provider model (the provider being the scheme in which a member has their pot for life). The call for evidence closes on 24 January 2024, and further consultation will be required, but it seems pot for life could be a reality sooner than the industry might have expected.

What next?

With the exception of the state pension triple lock, none of the Government’s proposals have been finalised. Further consultation will be required across the board, so it will be some time before we see any of these changes come into effect. That presents a challenge for the Government, which has increasingly less time to push the changes through before the general election. That election was predicted to take place next autumn, but the Autumn Statement has sparked speculation amongst political commentators that the Prime Minister may now being gearing up for it take place in the spring of 2024 instead.

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2024.

Insights

Read the latest articles and commentary from Shoosmiths or you can explore our full insights library.