Chancellor Pledges Major Growth Boost Through Pension Reform
Pensions minister Emma Reynolds will lead a review of the pensions landscape, with a primary focus on driving investment.
Chancellor of the Exchequer Rachel Reeves initiated a review of pension schemes on Saturday with the aim of increasing investment by billions and providing better returns for pensioners.
As part of her efforts to lead a “big bang for growth,” the chancellor outlined plans to pool pension funds and direct them towards investments in infrastructure, small businesses, and other projects.
This move follows the introduction of a Pension Schemes Bill during Wednesday’s King’s Speech, which seeks to assist savers by implementing automatic consolidation of small pension pots and establishing a value-for-money framework to enhance governance.
The Treasury estimates that these measures could boost an average pension pot by over £11,000.
The department is now exploring ways to promote more productive investment and improve retirement outcomes, including through further consolidation and encouraging larger schemes to enhance returns through broader investment strategies.
Given that defined contribution schemes are projected to oversee approximately £800 billion in assets by 2030, the initial phase of the review will look into methods to encourage investment in productive areas like essential infrastructure, as stated by the Treasury.
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The government is also considering consolidating the Local Government Pension Scheme (LGPS) in England and Wales, which currently oversees assets worth £360 billion.
If there is insufficient progress by March 2025, the government may contemplate legislation to mandate the pooling of the LGPS.
The review will also explore the advantages of further consolidation to reduce the £2 billion fees spent by LGPS.
In a statement, the chancellor expressed, “Despite facing significant challenges, this new Government is taking steps to fulfill our mandate of bolstering economic growth to enhance the well-being of all citizens.”
“The review we announce is part of a series of reforms to stimulate growth, enhance investment, and generate savings for pensioners. Time is of the essence. That’s why I am dedicated to strengthening the economic foundations to rebuild Britain and elevate people’s lives,” she added.
Pensions Minister Emma Reynolds, leading the review, mentioned that the review will concentrate on identifying additional measures to boost investment that can be incorporated into the Pension Schemes Bill in the upcoming months, followed by an examination of long-term challenges to ensure the pensions system remains relevant for the future.
“There is significant untapped potential in our pensions markets, with an industry valued at around £2 trillion. The steps we have outlined in our Pension Schemes Bill will promote increased investment and a better future for pensioners,” she stated.
PA Media contributed to this report.
