Financial News

  • 2 June 2014, 15:47

Workplace Pensions Shake-Up 'Could Boost Funds'

Radical changes to workplace pensions are set to be unveiled in the Queen's Speech this week, with supporters claiming the shake-up could boost retirement incomes by thousands of pounds.

Staff will be able to put their money into Dutch-style "collective pensions", which are shared with thousands of other members.

They are regarded by many as a better investment because they are less vulnerable to stock market variations.

The changes, which could be in place as early as 2016, are designed to give better value for pensioners.

Pensions Minister Steve Webb has described the collective schemes, also known as "mega funds", as "some of the best in the world".

Mr Webb told The Sunday Telegraph the key advantage was "pooling risk" of investments performing worse than expected across large numbers of people of different ages, "just like car insurance or the NHS".

"It gives people greater certainty and probably better value," he said.

However, critics of the model have warned that pensioners only have a "target" for what they will get in retirement, rather than a guarantee as is the case with a fixed annuity.

Pensioners could in some cases see their incomes fall if the collective fund's investments do not generate the expected profits.

The plan is based on schemes in the Netherlands and Scandanavia.

But some Dutch politicians have recently called for the pensions to be scrapped in favour of British-style individual pensions.

A new bill scrapping tax rules that have stopped pensioners taking more than a quarter of their savings in a cash lump sum will also be included in the Queen's Speech.

Other legislation expected includes:

:: A crackdown on highly paid civil servants and NHS executives getting large redundancy pay-offs before taking similar jobs within a year of leaving their posts.

:: Tax free childcare worth up to 2,000 per child for families where both parents have jobs.

:: A bill to change trespass laws to allow shale gas exploration firms to drill beneath private property without requiring permission from the owner.

:: The Queen's Speech is also expected to contain measures to support further oil and gas developments in the North Sea, and for more major roads to be built.

:: A "Recall Bill" allowing voters to sack their elected MPs, although this has been subject to disagreements inside the coalition.

Legislation for a referendum on Britain's membership of the European Union will not be included, amid opposition from the Liberal Democrats.

David Cameron is instead expected to promise he will use the Parliament Act to overrule the House of Lords and force a bill from a backbench Tory MP into law.

On the eve of setting out its legislative agenda, the coalition has been accused of running out of steam less than a year before the general election.

Labour has released figures claiming the coalition has become a "zombie government", with MPs debating fewer bills last year than at any time since 1950.

Treasury Minister Nicky Morgan rejected this, telling the Murnaghan programme the Queen's Speech will prove the government is "full of ideas".

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