Labour Chancellor Rachel Reeves has launched a “landmark pensions review” as part of the new Government’s mission to boost growth and make “Britain better off”.
Under plans unveiled by the Chancellor, billions of pounds of investment could be unlocked in the UK economy from defined contribution schemes, while Labour said pension pots in DC schemes could be boosted by over £11,000.
The review will also look at how to unlock the investment potential of the Local Government Pensions Scheme, which manages the savings of those working to deliver local services.
Chancellor of the Exchequer Rachel Reeves said: “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 commented: “Over the next few months the review will focus on identifying any further actions to drive investment that could be taken forward in the Pensions Schemes Bill 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 market, with an industry worth around £2 trillion. The measures we have already set out in our Pensions Schemes Bill will help drive higher investment and a better deal for our future pensioners.”
The launch of the initial review, focusing on investment, marks the first phase in reviewing the pensions landscape and will be led by the pensions minister. The next phase of the review will start later this year and will explore further steps to improve pension outcomes and increase investment in UK markets, including assessing retirement adequacy.
Richard Stone, chief executive of the Association of Investment Companies, said investment companies are perfectly placed to be part of the Chancellor’s growth drive.
He said: “With their permanent capital structure, investment companies can invest with ease in UK infrastructure, the net zero transition and high-growth unlisted companies. They are tried and tested vehicles for investing in the kind of productive assets the government wants to support, and they have a 150-year history of delivering for investors.”
Stone said that the Government’s review should consider how to overcome barriers to the use of investment companies, such as “misleading” cost disclosures and explore measures to reinvigorate capital markets, such as the abolition of stamp duty. In addition, the AIC has called for the charge cap on pension default funds to be reviewed, arguing that it poses a barrier to investing in productive assets.
“We’re supportive of the government’s efforts to release the untapped potential in our pensions markets to drive investment in the UK. We’re looking forward to working with the government to boost growth and release billions of pounds of investment,” Stone added.
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