Your support helps us tell the story.
From reproductive rights to climate change and big tech, The Independent is on the ground as the story unfolds. Whether investigating the finances of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word,' which sheds light on American women fighting for reproductive rights, we know how important it is to analyze the facts from the messaging .
At such a critical time in American history, we need journalists on the ground. Your donation allows us to continue sending journalists to talk about both sides of the story.
Americans across the political spectrum trust The Independent. And unlike many other quality news outlets, we choose not to exclude Americans from our reporting and analysis with paywalls. We believe quality journalism should be available to all and paid for by those who can afford it.
Your support makes all the difference.
Pension “mega funds” will be created to help unlock billions of pounds of investment in UK businesses and infrastructure.
Rachel Reeves will use her first speech at Mansion House on Thursday as chancellor to outline what is being billed as the biggest pension shake-up in decades.
Consolidating assets into a handful of funds managed by professional fund managers will allow them to invest more in infrastructure, supporting economic growth and local investment on behalf of the UK's 6.7 million public servants, the government says.
It predicts the move could generate around £80bn of investment in new businesses and critical infrastructure.
The reforms, which will be introduced through a new pension schemes bill next year, involve the consolidation of defined contribution (DC) schemes, as well as the pooling of assets of 86 local government pension scheme authorities .
There are already around 60 different multi-employer schemes, such as the Independent Schools Pension Scheme, each investing savers' money in one or more funds.
The government will consult on setting a minimum size requirement for these funds.
Treasury analysis indicates that pension funds begin to realize higher levels of productive investment once the size of the assets they manage reaches between £25 and £50 billion, when they are better placed to invest across a broader range. of assets.
Larger pension funds, with more than £50bn in assets, can take advantage of additional benefits, including the ability to invest directly in large-scale projects at a lower cost, he added.
The megafunds, which will mimic schemes in Australia and Canada, will have to meet rigorous standards to ensure they meet savers, such as the need to be authorized by the Financial Conduct Authority (FCA), the government said.
The England and Wales Local Government Pension Scheme has assets that are currently divided between 86 administrative authorities. By 2030, they are forecast to be worth around £500 billion.
Pension schemes in developing countries are expected to manage assets worth £800 billion by then.
Ms Reeves' speech comes amid warnings that changes to employers' National Insurance (NI) contributions could lead to job losses.
The Chancellor said: “Last month’s Budget laid the foundations for restoring economic stability and putting our public services on a firmer footing. “Now we are going for growth.”
Deputy Prime Minister Angela Rayner said: “This is about harnessing the untapped potential of millions of people's pensions and using it as a positive force to boost our economy.”
Jon Greer, head of retirement policy at wealth manager Quilter, said: “If managed carefully, this consolidation could open new doors for UK pensions, allowing access to infrastructure and private equity investments with strong upside potential. return.
“However, the success of this will largely depend on the availability of new infrastructure projects to invest in.
“Large funds need substantial, reliable projects to generate returns, but the market may struggle to offer enough such opportunities, especially in the infrastructure sector.”
Tom Selby, director of public policy at AJ Bell, said: “Conflating the government's aim of boosting investment in the UK and people's retirement outcomes is dangerous because all the risks are taken with people's money. members”.
And he added: “It is necessary to be somewhat cautious in this tendency to use other people's money to boost economic growth. It is necessary to make it very clear to members what is happening with their money.”
Tom McPhail, public affairs director at consultancy Lang Cat, urged caution, saying: “Is it safe to assume that all schemes will want to invest in the opportunities they have described?”
