The UK could unlock around £100 billion a year through a package of pension reforms, according to leading pensions consultancy Hymans Robertson.
The firm outlines a cost-neutral plan to save money for both the government and employers, while improving retirement outcomes for millions in a new policy paper titled The Untapped Potential of Pensions.
The paper presents a range of fully costed policy proposals as the government prepares for the second phase of its Pensions Review, which includes tax changes that won’t reduce take-home pay or pension value, reforms to collective pensions, and the use of defined benefit (DB) pension scheme surpluses to boost UK investment.
Hymans Robertson estimates that if all proposals were implemented, the Treasury could gain up to £28.5 billion annually, while employers could save around £14.2 billion. This could result in the creation of a £1 trillion National Wealth Fund over ten years, with private investment to help the UK’s transition to Net Zero and boost economic growth.
The research also urges enhanced pension access for independent contractors and enhancements to auto-enrolment. It draws attention to the fact that although auto-enrolment has raised pension participation, the existing rates of contributions are insufficient to support decent retirements. It also notes that the disparity in individual savings will be highlighted by the upcoming pension dashboards.
Hymans says that forward-thinking reform could generate revenue for the Treasury, reduce employer costs, and significantly improve financial security for future retirees.
Hymans Robertson head of pension policy innovation Calum Cooper says: “The promised second phase of the pensions review presents an opportunity to make lasting changes to give people financial independence in later life for as long as they live.
“But it’s also an opportunity to meet other important aims, such as improving equity, unlocking tens of billions of pounds annually and investing in UK economic growth at a huge scale. This is a once-in-a-generation opportunity to align pensions policy with national prosperity.
“Our proposals outline how unlocking the untapped potential in pensions could save the Treasury and employers money, while stimulating investment in the UK. It could generate the £100bn a year that is needed for 3 per cent economic growth and our Net Zero transition.
“A big change requires lots of work, and this would be a huge job for the pensions industry to implement. But the risk of inaction and the opportunity is also huge; to help current and future generations of workers, and the economy. It could lead to £1trn more investment in the UK, over 10 years, while delivering better pensions for workers.
“Our proposals are bold, but they’d deliver financial security for workers, cost savings for employers, and a massive boost for the UK economy.”
