The Pension Schemes Act 2021 has now received Royal Assent, which marks the start of real change in terms of the UK’s pension system.
It has big implications for your retirement fund – this guide outlines the important changes you need to know about.
Blending Defined Benefit and Defined Contribution schemes
In the past, industry experts have highlighted the disconnect between DB (Defined Benefit) and DC (Defined Contribution) pension schemes.
The new Act introduces a new scheme – the CDC (Collective Defined Contribution) scheme. This means that you and your employer can contribute a fixed sum into a collective fund, which you’ll be able to draw an income from as soon as you retire.
The purpose of the scheme is to boost your pension pot. It’s believed that it will elevate retirement savings by 70% when compared to the Defined Contribution scheme, and 40% in comparison to a Defined Benefit scheme.
Your pension dashboard
Lack of clarity has proven to be a major issue with pensions in the past. That’s why the Act is introducing a new dashboard, where you’ll be able to view all your pension products in one location. It will include any new pensions you invest in, alongside any pre-existing schemes. The dashboard will also highlight any fees or additional charges associated with your pension products.
This is set to be launched in 2023, and it’s hoped that the added transparency will help to reduce confusion or uncertainty.
An environmental focus
The environment is becoming a big priority for many people in the UK, and rightly so. However, this has always been an issue in terms of pension products, thanks to a lack of transparency regarding what industries the pensions are actually invested into.
The new Act requires pension products to come with a full disclosure of their ‘climate-risk’, giving you far greater control over where you invest your retirement funds. It’s believed that this will inspire providers to offer a greater selection of ‘green pensions’ in the future.
Protection against scams
The industry has seen a huge increase in pension-related scams in recent years. The Pension Schemes Act seeks to address this, by giving greater powers to the Pensions Regulator. Additionally, new criminal offences relating to pension products are being introduced. This may help to reduce instances of scamming.
There’s also going to be more protection for investors who choose to transfer their pension scheme. At present, unscrupulous scammers target those who want to transfer to a DB pension, by instructing them to deposit their retirement funds into a fake investment. The new Act seeks to limit this practice, by asking retirees to provide an employment link during the transfer.
What to do if you’ve been mis-sold your pension
If you’ve recently transferred your pension or signed up for a new pension plan, ask yourself the following:
- Did the financial advisor explain the pension product in full?
- Did they explain the level of risk involved?
- Did they assess your attitude to risk?
- Did they provide you with a full range of options?
- Did they explain that in some instances, it’s better to stick with your workplace pension?
If you answered ‘no’ to any of the above, you might have been a victim of pension mis-selling. Get in touch with Goodwin Barrett today, to find out if you’re eligible for compensation – you can reach us by calling 0808 163 1659 today or email firstname.lastname@example.org.