UK’s pensions megafund plan ‘could hurt savers’; renters face ‘chasm’ as demand outstrips supply – business live

Fears over UK plan to create pension 'mega funds' to invest in infrastructure.Chancellor Rachel Reeves is to lay out plans today to create pension "mega funds" in a drive to to increase infrastructure investment.

will tell the City tonight that she will introduce a new pensions bill next year, to pool assets from the 86 separate local government pension schemes (LGPS) into a single vehicle.

Those various defined-benefit schemes cover 6.5 million members and £360bn in assets. Putting them into one pot would create a set-up similar to those in Australia and Canada, where single large pension funds managed by professional investors invest more in infrastructure

The chancellor will tell an audience of City leaders and chief executives at the Mansion House tonight that the plan could unlock £80bn of investment.

says:

Last month's Budget fixed the foundations to restore economic stability and put our public services on a firmer footing. Now we're going for growth.

That starts with the biggest set of reforms to the pensions market in decades to unlock tens of billions of pounds of investment in business and infrastructure, boost people's savings in retirement and drive economic growth so we can make every part of Britain better off.

But... there are concerns that the plan could put people's retirement savings in danger.

Tom Selby, director of public policy at , fears that the interests of savers may be left behind as ambitious measures could put savers' money at risk and undermine their retirement goals.

says:

"The government's hope will be that by moving from having 86 local government schemes down to a single one, or a few, will benefit from economies of scale.

"My overarching concern is that the needs of the saver, whose money is ultimately going to be risked, will be forgotten about. There's a reason that an occupational scheme has a trustee to look after the interests of members. Part of that is investing their money to maximise returns and get the best retirement outcomes possible.

adds:

"Conflating a government goal of driving investment in the UK and people's retirement outcomes brings a danger because the risks are all taken with members' money. If it goes well, everyone can celebrate. But it's clearly possible that it will go the other way, so there needs to be some caution in this push to use other people's money to drive economic growth.

"It needs to be made very clear to members what is happening with their money. One of the strengths of the system we have today is that investment decisions for members of defined contribution (DC) default funds and defined benefit (DB) schemes have independence baked in, usually via the appointment of trustees. Those trustees are required to make those decisions first-and-foremost with the aim of delivering the highest possible income in retirement for members.