Chancellor’s plan to combine pensions aims to unlock £80bn in funding for UK infrastructure projects

Chancellor Rachel Reeves is set to announce bold new reforms aimed at revamping the UK’s pension system and driving significant investment in infrastructure. Under the proposed plan, pension “mega funds” will be created by pooling together pension assets, drawing inspiration from successful models used by large pension schemes in Canada and Australia.

These mega funds would allow for larger-scale investments, potentially unlocking up to £80bn for infrastructure development across the UK. The government believes that by grouping together pension funds, the scale of investment would generate greater returns and provide a more stable source of funding for critical projects such as transportation, housing, and energy.

Reeves is expected to elaborate on the specifics of her proposal during a speech at Mansion House on Thursday evening. The move comes as part of the government’s ongoing efforts to enhance infrastructure funding while ensuring that pension schemes remain secure and sustainable for the future.

By following the example set by pension funds in Canada and Australia, which have successfully invested in large infrastructure projects, the UK hopes to harness the potential of its pension assets to drive economic growth and improve the country’s infrastructure without placing a burden on taxpayers.

The reforms are seen as a key component of the government’s long-term strategy to modernise and strengthen the UK’s pension system while facilitating essential investment in the country’s future.

THE GUARDIAN

Chancellor Rachel Reeves is set to announce a major overhaul of the UK’s local government pension schemes (LGPS), aimed at pooling assets from the 86 separate schemes into larger “megafunds.” This move, part of her upcoming pensions bill to be introduced next year, is inspired by similar consolidations in countries like Canada and Australia. These larger, unified funds would allow for more efficient investment in long-term assets such as infrastructure, startups, and private equity, while reducing fees paid to financial intermediaries like bankers and lawyers.

The reforms target the £360 billion in assets held by LGPS, benefiting its 6.5 million members. The government claims that the plan will result in substantial cost savings for councils and boost investments for local and national infrastructure. Reeves’ proposals are being framed as part of the most significant pension reform in decades, aligning with broader goals to modernise the public pension system. The initiative also includes plans to combine smaller defined contribution schemes across the country.

BBC

Chancellor Rachel Reeves has argued that the UK’s public sector pension funds are too small to deliver strong returns for savers, prompting the government’s plan to consolidate local government pension schemes into larger “pension megafunds.” These funds, which currently manage £354 billion across 86 separate schemes, would be merged to allow for more substantial investments in long-term assets like energy infrastructure and tech start-ups, similar to systems in Canada and Australia.

Reeves emphasized that larger, consolidated funds would have the capacity to generate better returns and stimulate UK economic growth. However, critics have expressed concern that the approach could increase risk, as larger funds may be forced to pursue riskier investments. Some argue that focusing on UK-wide growth may conflict with the primary goal of securing retirement income for members. There are also concerns about the availability of sufficient large-scale projects to match the increased funding.

Despite these risks, the government believes that consolidating pension schemes could unlock £80 billion in investment. The move is part of what Reeves describes as the biggest pension reforms in decades, with plans to set a minimum size for defined contribution schemes and to encourage investment in the local economy. Critics, however, warn that such large-scale consolidation might expose savers to higher financial risks.