Pension reforms aim to boost investment and retirement savings

Government has set out planned reforms to pension schemes that aim to unlock greater investment in infrastructure projects and deliver higher returns on savings.

Proposals set to be introduced in the Pension Schemes Bill will mean all multi-employer Defined Contribution pension schemes and Local Government Pension Scheme pools manage at least £25 billion in assets by 2030. These changes will drive more investment directly into the UK economy for new homes and promising scale-up businesses, with over £50 billion secured through the recent voluntary commitment from pension funds to invest 5 percent of assets in the UK and new local investment targets for Local Government Pension Scheme authorities.

Reforms follow evidence of the successes of so-called pension ‘megafunds’ in Australia and Canada.

New figures from the final report of the Pensions Investment Review published today also show that these reforms will drive higher returns for savers, in part by cutting waste in the system. By 2030 these schemes could be saving £1 billion a year through economies of scale and improved investment strategies. As a result, an average earner who saves over their career could see a £6,000 boost to their Defined Contribution pension pot at retirement.

Chancellor of the Exchequer, Rachel Reeves, said:

“We’re making pensions work for Britain. These reforms mean better returns for workers and billions more invested in clean energy and high-growth businesses.“

Deputy Prime Minister, Angela Rayner said:

“The untapped potential of the £392 billion Local Government Pension Scheme is enormous. Through these reforms we will make sure it drives growth and opportunities in communities across the country for years to come.“

Minister for Pensions, Torsten Bell, said: 

“Our economic strategy is about delivering real change, not tinkering around the edges. When it comes to pensions, size matters, so our plans will double the number of £25 billion plus megafunds. These reforms will mean bigger, better pension schemes, delivering a better retirement for millions and high investment in Britain.“

Irene Graham OBE, CEO ScaleUp Institute said:

“This represents a significant milestone in ensuring British institutions back British business – at the scale required – to generate growth, employment and wealth. UK pension funds are central to achieving this goal and addressing the UK’s longstanding growth capital gap that have held back growth ambitions. 

“The ScaleUp Institute, and the broad representatives of the scaleup economy across the UK, have written to the Chancellor today to welcome the Government’s final report on the Pensions Investment Review and the Government’s commitment to double the number of UK pension megafunds by 2030, thereby unlocking billions of patient capital to scaling businesses across the country.“