UK launches pension system overhaul

LONDON:

Britain’s new Labour government has launched a review of the pension system, aiming to invest more in productive assets to boost economic growth and improve retirement incomes, it was announced on Saturday.

Prime Minister Keir Starmer, whose government has made tackling the country’s sluggish growth a top priority since winning the July 4 election, is leading the inquiry.

In the first legislative package, the government last week submitted a new pension law. This law is intended to stimulate the consolidation of smaller pension schemes and to diversify investment strategies.

“The review we are announcing is the latest in a ‘big bang’ of reforms to unlock growth, boost investment and deliver savings for pensioners,” said Finance Minister Rachel Reeves. “I am determined to repair the foundations of our economy.”

Defined contribution schemes are expected to manage around £800 billion ($1 trillion) of assets by the end of the decade. Increasing their investment in productive assets could significantly boost the economy and help develop infrastructure, the Treasury noted.

The review will also look at ways to increase the investment potential of the £360bn Local Government Pensions Scheme (LGPS), which manages savings for local authority employees across the UK. The LGPS, currently fragmented across almost 90 funds, could benefit from consolidation to reduce waste, the government has suggested. It said that if insufficient progress has been made by March 2025, legislation to pool the funds could be considered.

Reeves and Pensions Minister Emma Reynolds will chair a roundtable with the pensions sector on Monday.

The first phase of the review is expected to report within the next few months, focusing on the stability of the UK government bond market, liquidity and diversity. A subsequent phase will address the wider pensions landscape.

Barclays has expressed its support for the government’s “timely overhaul” of the pension sector. “Pension reforms are critical to unlocking institutional investment in growth capital,” the bank’s CEO CS Venkatakrishnan said.