Labour has revealed plans to force small pension schemes to merge in order to increase scale in the market and reduce costs.
Giving a speech to the Birmingham Chamber of Commerce last week, shadow work and pensions secretary Liam Byrne said Labour wants to introduce “Australian-style” reforms to the UK pensions market.
In Australia, the regulator has the power to force small pension schemes to merge if they cannot prove they are operating efficiently.
Byrne said: “We will step up our fight for private pensions people can trust with Australian-style reforms for low cost, low risk private pensions.”
In November, the DWP published a wide-ranging policy document outlining how it thinks saving could be made more attractive.
The paper explores a number of policy options, including forcing any scheme which does not meet certain efficiency standards to merge with another scheme and encouraging the development of scale in occupational pensions provision.
In an interview with Money Marketing in February last year, The Pensions Regulator’s chief executive Bill Galvin said “sub-scale” schemes with fewer than 1,000 members may not be suitable for automatic enrolment.
Syndaxi Chartered Financial Planners managing director Robert Reid says: “The idea that scale in pensions always results in a reduction in costs is a myth promulgated by people who have never run or operated schemes.”