Pensions minister Laura Trott said the shake-up of private pensions will also include reform of the charge cap on a company’s “default” defined contribution (DC) pension schemes that employees are offered or auto-enrolled in.
The aim is to close an “inequality gap” between DC schemes and defined benefit or DB schemes, where typically more generous payouts are linked to an employee’s past earnings. These schemes are being phased out to new employees due to cost. DC pension schemes’ performance is tied to swings in stock and bond markets.
“The value for money framework will improve transparency, comparability, and competition between defined contribution pension schemes and help deliver the best possible value and long-term outcomes for pension savers,” Britain’s ministry for work and pensions said in a statement.
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