Chancellor Rachel Reeves has launched ‘landmark review’ of the UK pensions system, which seeks to promote greater pensions investment by British workers, as well as increase the size of the average earner’s pension pot and reduce process inefficiencies.
The planned review will unfold in two phases. The first phase, led by Pensions Minister Emma Reynolds, will concentrate on productive investment, scheme consolidation, and diversified investment strategies. The second phase, meanwhile, will begin later this year and is set to focus on enhancing pension outcomes and fostering investment in UK markets.
The initiative fulfils Labour’s election pledge to significantly overhaul the UK pension landscape and Reeves and Reynolds are expected to convene a roundtable with industry leaders as part of the engagement process.
Reeves, who became Chancellor earlier this month following the Labour Party’s victory in the 4th July election, has highlighted the necessity of reforming the system in order to spur economic growth, increase investment and improve pension savings.
The government anticipates that defined contribution schemes will hold approximately £800 billion in assets by 2030: Labour suggests that redirecting just 1% of these assets into productive investments “could mean £8bn of new productive investment to grow the economy and build vital infrastructure by the end of the decade”. These investments are expected to yield higher returns, thereby helping individuals save more effectively.
As the first joint Treasury and DWP minister, Reynolds has argued she’s uniquely qualified to address the dual challenges of productive investment and retirement outcomes.
Initially, it’s expected the review will identify measures to boost investment for potential inclusion in the government’s planned pension schemes bill. In later phases, it will explore long-term solutions to ensure the long-term sustainability of the pension system.
Announced last week during the King’s Speech, the pension schemes bill outlines plans to scrutinise underperforming default funds, consolidate small pension pots and require workplace pension schemes to offer retirement income solutions.
Taken together, these measures are intended to drive higher investment and secure a better future for pensioners.
Source: Austin, Amy. FT Adviser. July 2024. https://www.ftadviser.com/pensions/2024/07/22/chancellor-launches-pensions-review-to-boost-investment-and-savings/.