UK Chancellor of the Exchequer Rachel Reeves is set to announce plans later on Thursday to merge dozens of pension funds in a bid to unlock tens of billions of pounds for investment and boost Britain’s sluggish economic growth.
In comments released by the Treasury ahead of her speech to financial leaders in central London, Reeves will say the creation of so-called mega-funds would be the biggest pension reform for decades.
In her first so-called Mansion House speech, an annual ritual for UK chancellors of the exchequer, Reeves will say the changes could help unlock £80 billion ($100 billion) in investment. Pension funds invest in a variety of assets, such as shares, bonds, property and infrastructure, in a bid to boost pension benefits for their members.
The proposed merger of 86 local government pension funds in England and Wales has parallels with schemes in Australia and Canada, where pension funds are renowned for their size to invest in assets and drive growth. By 2030, the new Local Government Pension Fund Scheme in England and Wales will be able to manage around £500 billion in assets.
The new Labour government will introduce the reforms through a new Act in Parliament next year. Early indications point to broad support from both the political camp – the former Conservative government also indicated it would follow this path – and from within the pensions industry.
Larger pension schemes can help achieve better outcomes for savers through economies of scale, stronger governance, bargaining power and additional resources,” said Zoe Alexander, director of policy and advocacy at the Pensions and Savings for Life Association, an organisation that aims to unite the industry and encourage best practice.