Women ‘disadvantaged’ by Rachel Reeves pension plan, says expert | Retirement | Finance

Plans for a major change in pensions rules could leave women at a disadvantage, an expert has warned. Rachel Reeves plans to combine smaller funds into a group of giant megafunds in the Pension Schemes Bill. The chancellor says this will benefit workers by £6,000 by the time they retire. However, a finance expert has warned the public to be wary of these claims.

Antonia Medlicott, Managing Director of financial education specialists Investing Insiders, has now questioned the move warning only a specific demographic will see the benefit. She said: “The government has claimed that its plan to create around 20 so-called ‘mega-funds’ could boost the average pension pot by around £6,000, and it’s no surprise this has been met with some scrutiny’.”

She added: “The £6,000 figure being thrown around needs to be taken with a pinch of salt, as it is based on a particular set of circumstances that will not apply to most savers. One crucial factor is that it is based on a man, meaning – women stand to gain less on the whole, as they are more likely to take career breaks and miss out on pension contributions.”

The expert is not completely against Rachel Reeves’ plan, saying it has been successful other countries. She explained: “There is some logic behind the idea. Larger pension funds are able to invest at scale, which has proven to generate better returns for savers.

“For example, Australia’s superfunds have returned an average of 8.8% over the past decade, compared to the UK’s average of 7.6%, recent calculations have found. That gap may not sound huge, but over time, that difference could amount to tens of thousands of pounds.”

The government has also said it will reserve power to force pension funds to support British assets. This is aimed at boosting investment into the UK economy, but Antonia warns this removed control from pension holders.

Antonia cautioned: “The announcement that the government may take ‘reserve powers’ to potentially force pension funds to invest in private markets should raise alarm bells. It is the trustees’ responsibility to do what is in the best interests of savers, and meeting strict asset allocation targets to satisfy the government’s desire to boost the economy doesn’t necessarily align with that duty.”

She added: “Any government intervention in this process risks undermining trust in the system, and it will need to be carefully scrutinised and justified to ensure it works for savers.’’ The warning comes as women are already fighting for compensation after a previous government change in the State Pension age. Many claim they were disadvantaged when the retirement age for women was aligned with men.

In the past women claimed their State Pension when they reached 60 while men had to wait until they were 65. Under the 1995 Pensions Act this was equalised with both then receiving their money at 65.

The change was to be phased in over 10 years from 2010 for women born between 1950 and 1955. But many women said they had insufficient notice and said they were unaware they would have to wait longer to claim their State Pension.

A Parliamentary and Health Service Ombudsman investigation found failings on the part of the DWP, saying it should have contacted the women earlier. However the Labour government has said it will not pay compensation, claiming most women knew of the change and saying issuing a payout would be a poor use of taxpayer money.