The announcement will be a much-welcome bonus for elderly Brits
The whopping 60% increase helps boost pension pots during the cost of living crisis(Image: PA)
A government announcement today revealed that pension schemes will be transitioned into a collective fund. This change promises to provide workers with regular lifetime pension payments, increased security, and higher retirement incomes compared to individual pension pots.
The new regulations will help facilitate the expansion of Collective Defined Contribution (CDC) schemes to more employers and address the growing demand among workers for a more secure retirement income.
Research indicates that nearly three-quarters of individuals with older-style pension schemes desire a guaranteed income from their pensions, despite 50% of these funds being currently withdrawn as lump sums.
In addition to improving the retirement living standards of today’s workers, pooling funds will enable schemes to make larger investments in assets like UK businesses and infrastructure projects. This strategy is expected to stimulate economic growth, as demonstrated in countries such as Canada and Denmark, which already have CDCs.
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Minister for Pensions Torsten Bell stated, “Too often people approaching retirement are left navigating complex choices and shoulder risks they shouldn’t have to face alone.
“Collective pensions offer savers a new option that in many cases will be a better deal, one where risks are shared, returns are smoothed and retirement incomes are stronger and paid for life.
“By expanding CDC to more employers and consulting on retirement CDC, we are helping build a fairer pensions system that gives people confidence their hard-earned savings will last and they can enjoy their retirement.”
In advance of the regulations being introduced tomorrow, MP Bell will deliver a speech later today (22nd October) to hundreds of key employers across the UK, outlining the benefits of CDC schemes and the next steps for their implementation.
This initiative builds on the success of the UK’s first CDC scheme, the Royal Mail Collective Pension Plan, which boasts over 100,000 members and reflects the rising demand for pensions that deliver a lifelong income.
Additionally, the Government is launching a consultation on ‘Retirement CDC,’ which would allow individuals who have saved into a Defined Contribution (DC) scheme to transfer their pension pot into a CDC scheme upon retirement.
This aims to enable more people to receive a regular income for life that keeps pace with rising prices, alleviating the stress of managing their retirement funds and determining how long their savings will last.
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