Rishi Sunak's pensions plan means Britons face FIVE extra years of work - millions hit

Asia's Tech News Daily

Policy advisers to the Treasury are looking at ways to fund public spending amid record levels of debt due to the pandemic. Later this month the Chancellor will unveil his plans to MPs when he delivers his Budget in the Commons.

It is thought the man in No11 is looking at loosening the cap on pension management fees to help persuade funds to invest in UK start-ups, technology companies and renewable energy schemes.

Pension managers have been dissuaded from investing in those areas in the past because they are more expensive assets which often result in performance fees that could be higher than the 0.75 percent cap.

Consultancy XPS Pensions Group has warned any easing on the cap could have an incremental impact on Britons’ retirement plans.

Their analysis indicates if fees rose from 0.75 percent to 1.5 percent it would mean an extra five years of work.

© PA Rishi Sunak is thought to be preparing to change pension fund rules

Currently, pensioners typically receive £19,000 a year, based on private funds and the state pension.

The annual amount will be paid out to anyone with a retirement pot of £305,000 by age 66.

But it would take until the age of 71 to reach the same payout if fees doubled.

Even just a 0.25 percent rise would mean an extra year of work to make up for the lost money.

Any announcement on a change to pension fund rules would likely be subject to a formal consultation.

But it comes after the Treasury announced plans earlier this year to find ways to encourage schemes to invest in “high-growth companies”.

© EXPRESS How long will it take you to become a ‘pension millionaire’?

The 0.75 percent cap was introduced in 2015 to coincide with the auto-enrolment of employees onto company pension schemes.

The Government was eager to stop firms exploiting workers by making an excessive profit from vulnerable savers who had been placed into the pension with little understanding.

Since 2015 about ten million people have been enrolled on pensions schemes.

Prime Minister Boris Johnson has made levelling up the UK central to his Government’s mission.

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© PA Pensions Secretary Therese Coffey is thought to be onboard with the plans

He has pledged to improve opportunities in the north of England and other areas to offer “hope and opportunity to those areas that have felt left behind”.

Mr Johnson sees more investment infrastructure and extra capital start-up firms as key ways to make his vision a reality.

Britain currently has record debt levels after unprecedented public spending during the coronavirus crisis to keep the economy afloat.

Mr Sunak is looking at how to bring down the eye-watering £2trillion sum while also funding levelling up projects and watering down pension fund rules is understood to have the backing of Pensions Secretary Therese Coffey.

© PA The Chancellor said he was still fiscally responsible

Addressing the Conservative party conference earlier this month he said he would always be finally responsible while Chancellor.

“There can be no prosperous future unless it is built on the foundation of strong public finances.

“And I have to be blunt with you. Our recovery comes with a cost,” Mr Sunak said.

“Our national debt is almost 100 percent of GDP, so, we need to fix our public finances because strong public finances don’t happen by accident.”

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