Government announces package of pension reform at Autumn Statement

The government published a package of pension reform on 22 November 2023, alongside the Autumn Statement, covering consolidation of small pots, saver outcomes and investment by pension funds¹. HM Treasury said the measures were the next steps of the Chancellor's Mansion House reforms and met three "golden rules": securing the best possible outcomes for pension savers, prioritising a strong and diversified gilt market, and strengthening the UK's competitive position as a financial centre¹.

On saver outcomes, the government is introducing a multiple default consolidator model for defined contribution (DC) schemes, to enable a small number of authorised schemes to act as a consolidator for eligible pension pots under £1,000¹. It launched a call for evidence for DC schemes on a lifetime provider model, which would allow individuals to move towards having one pension pot for life, and on a potentially expanded role for Collective DC schemes¹. It also published an update proposing duties on DC occupational pensions trustees to offer decumulation services and products at an appropriate quality and price when savers access their pension assets, either themselves or through a partnership arrangement¹.

On consolidation, the government said it expects to see a market in which the vast majority of savers belong to schemes of £30 billion or larger by 2030¹. It welcomed the Financial Conduct Authority and the Pensions Regulator announcements on next steps towards implementing the Value for Money framework in the DC workplace pensions market, and published a review of the Master Trusts market five years after the 2018 Master Trusts regulations came into force¹. It is consulting this winter on how the Pension Protection Fund can act as a consolidator for defined benefit (DB) schemes unattractive to commercial providers¹.

For the Local Government Pension Scheme in England and Wales, the government confirmed a March 2025 deadline for accelerated consolidation of assets, set a direction towards fewer pools exceeding £50 billion Assets Under Management, and set a 10% allocation ambition for investments in private equity¹.

On investment, the government is consulting this winter on whether changes to rules around when DB scheme surpluses can be repaid, including new mechanisms to protect members, could incentivise investment by well-funded schemes in assets with higher returns¹. It is reducing the authorised surplus payments charge from 35% to 25% from 6 April 2024¹. It committed £250 million to two successful bidders in the Long-term Investment for Technology and Science (LIFTS) initiative, subject to final agreement, confirmed its intention to establish a Growth Fund within the British Business Bank, and is developing a fellowship course targeting mid-career science and technology venture capital investors, similar to the Kauffman Fellowship in the US, to be operational in 2024¹.

Why it matters for households

The small pot measures concern people with deferred pension pots under £1,000, who could see those pots consolidated into a small number of authorised schemes under the multiple default consolidator model¹. The call for evidence on a lifetime provider model concerns people who accumulate pots with several employers and could in future move towards one pot for life, though this is at the evidence-gathering stage¹. The decumulation proposals concern DC occupational scheme members at the point they access their pension assets¹.

The DB surplus changes concern members and sponsors of defined benefit schemes: the authorised surplus payments charge falls from 35% to 25% from 6 April 2024, and the consultation on surplus repayment rules includes proposed new mechanisms to protect members¹. LGPS members in England and Wales are affected by the March 2025 consolidation deadline and the pooling direction¹. The £30 billion scheme size expectation by 2030 concerns the structure of the market savers' DC pots sit within, rather than the value of individual pots¹.

What happens next

Consultations are due this winter on the Pension Protection Fund acting as a consolidator for DB schemes, and on changes to rules around when DB scheme surpluses can be repaid¹. The call for evidence on a lifetime provider model and on an expanded role for Collective DC schemes is open¹. The reduced authorised surplus payments charge takes effect from 6 April 2024¹. The LGPS consolidation deadline is March 2025¹. The venture capital fellowship course is intended to be operational in 2024¹. The £250 million LIFTS commitment is subject to final agreement¹.

For background on the basic State Pension, SERPS and the Additional State Pension, the Local Government Pension Scheme and free guidance through Pension Wise, see the site's pensions guide.