Landmark pensions review part of Government’s mission to ‘boost growth and make every part of Britain better off’
The Chancellor Rachel Reeves has announced a landmark pensions review as part of the new Government’s mission to ‘boost growth and make every part of Britain better off’.
Under plans unveiled by the new Chancellor, billions of pounds of investment could be unlocked in the UK economy from defined contribution schemes alone and pension pots for savers in defined contribution schemes could be boosted by over £11,000.
The Review will also, working closely with the Minister of State at MHCLG Jim McMahon, look at how to unlock the investment potential of the £360 billion Local Government Pensions Scheme, which manages the savings of those working to deliver our vital local services, as well as how to tackle the £2 billion that is being spent on fees.
The announcement comes ahead of the first Growth Mission Board on Tuesday. This will be chaired by the Chancellor and drive the Government’s work to achieve the highest sustained growth in the G7. New measures have already been announced to fix the planning system, the creation of a new National Wealth Fund and the overhaul of the listings regime to boost UK stock exchanges.
The work announced today – focusing on investment – is the first phase in reviewing the pensions landscape and will be led by the first ever joint Treasury and Department for Work and Pensions Minister, Emma Reynolds (Minister for Pensions). The next phase of the review starting later this year will consider further steps to improve pension outcomes and increase investment in UK markets, including assessing retirement adequacy.
The Chancellor and the Pensions Minister will chair a roundtable with the pensions industry on Monday to start intensive industry engagement for the Review.
Chancellor of the Exchequer Rachel Reeves said:
Deputy Prime Minister Angela Rayner said:
Pensions Minister Emma Reynolds said:
Legal & General Group Chief Executive António Simões said:
BVCA Chief Executive Michael Moore said:
Aviva Director of Workplace Savings and Retirement Emma Douglas said:
Phoenix Group CEO Andy Briggs said:
Defined contribution schemes will be managing around £800 billion in assets by the end of the decade and the Review will explore ways to increase their investment into productive assets. Even a 1 percentage point shift of assets into productive investments could mean £8 billion of new productive investment to grow the economy and build vital infrastructure by the end of the decade.
This would also help savers using these schemes build up better retirement pots as productive assets are more likely to provide higher returns. Immediate action has already been taken to boost retirement savings through the Pensions Bill, which introduces a Value for Money Framework to promote better governance and achieve higher returns – boosting the pension pot of an average earner who saves over their lifetime in a defined contribution scheme by over £11,000.
The first stage of the review will examine actions to support greater productive investment and better retirement outcomes, including through further consolidation and encouraging at-scale schemes to increase returns through broader investment strategies.
The Local Government Pension Scheme (LGPS) in England and Wales is the seventh largest pension fund in the world, managing £360 billion worth of assets. Its value comes from the hard work and dedication of 6.6 million people in our public sector, mostly low-paid women, working to deliver our vital local services. Pooling this money would enable the funds to invest in a wider range of UK assets and the government will consider legislating to mandate pooling if insufficient progress is made by March 2025.
To cut down on fragmentation and waste in the LGPS, which spends around £2 billion each year on fees and costs and is split across 87 funds – an increase in fees of 70% since 2017, the Review will also consider the benefits of further consolidation.
The first stage of the review will report in the next few months and consider further measures to support the Pensions Bill. It will take account of the need to prioritise gilt market stability, liquidity and diversity. It will then broaden out to consider the wider pensions landscape to strengthen security in retirement. In the meantime, immediate action has been taken through new laws announced to Parliament in The King’s Speech.
Barclays CEO C. S. Venkatakrishnan said:
Association of British Insurers Director General Hannah Gurga said:
M&G plc CEO Andrea Rossi said:
Border to Coast CEO Rachel Elwell said:
Nest CEO Ian Cornelius said:
Pension Protection Fund CEO Michelle Ostermann said:
Pensions and Lifetime Savings Association Director of Policy and Advocacy Nigel Peaple said:
Pensions & Private Capital Expert Panel Chair and co-founder of IQ Capital Kerry Baldwin said:
TheCityUK CEO Miles Celic said:
Royal London Group Chief Executive Barry O’Dwyer said:
Citi UK CEO Tiina Lee said: