Chancellor of the Exchequer Rachel Reeves launched a review of pension schemes on Saturday in a bid to boost investment by billions and deliver better returns for pensioners.
As part of her ambition to lead a “big bang for growth,” the chancellor outlined plans to pool pension funds and get them to invest in infrastructure, small businesses, and other projects.
It follows the inclusion of a Pension Schemes Bill in Wednesday’s King’s Speech, to help savers by introducing automatic consolidation of small pension pots and a value-for-money framework to improve governance.
The Treasury said the measures could boost an average pension pot by over £11,000.
The department is now looking for ways to encourage greater productive investment and better retirement outcomes, “including through further consolidation and encouraging at-scale schemes to increase returns through broader investment strategies.”
With defined contribution schemes expected to manage around £800 billion in assets by 2030, the first phase of the review will explore ways to encourage investment into productive investments such as vital infrastructure, the Treasury said.
The government also plans to consolidate the Local Government Pension Scheme (LGPS) in England and Wales, which is managing £360 billion worth of assets.
The government said it will consider legislating to mandate the pooling of the LGPS if insufficient progress is made by March 2025.
The review will also consider the benefit of further consolidation in a bid to cut the £2 billion fees spent by LGPS.
In a statement, the chancellor said: “Despite a very challenging inheritance, this new Government is getting on with the job of delivering our mandate to get the economy growing so we can make every part of our country better off.
“The review we are announcing is the latest in a big bang of reforms to unlock growth, boost investment, and deliver savings for pensioners. There is no time to waste. That is why I am determined to fix the foundations of our economy so we can rebuild Britain and improve people’s lives.”
Pensions Minister Emma Reynolds, who is leading the review, said in a statement that the review “will focus on identifying any further actions to drive investment that could be taken forward in the Pension Schemes Bill” over the coming months “before then exploring long-term challenges to ensure our pensions system is fit for the future.”
“There is so much untapped potential in our pensions markets, with an industry worth around £2 trillion. The measures we have already set out in our Pension Schemes Bill will help drive higher investment and a better deal for our future pensioners,” she said.
