UK plans pension overhaul for economic growth

Britain’s new Labour government is reviewing the pensions system to shift more investment into productive assets, aiming to boost economic growth and improve retirement incomes.

Prime Minister Keir Starmer, who won the July 4 election, has prioritised tackling the country’s slow economic growth.

The government announced a new Pensions Schemes Bill, which seeks to consolidate smaller pension schemes and broaden investment strategies.

Finance Minister Rachel Reeves stated, “The review we are announcing is the latest in a ‘big bang’ of reforms to unlock growth, boost investment, and deliver savings for pensioners.”

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

The review will also explore increasing the investment potential of the £360 billion Local Government Pensions Scheme (LGPS), which manages savings for local authority workers across Britain.

The LGPS, currently split across nearly 90 funds, could benefit from consolidation to reduce fragmentation and waste. The government may legislate to mandate pooling the money if insufficient progress is made by March 2025.

Reeves and Pensions Minister Emma Reynolds will chair a roundtable with the pensions industry on Monday. The first stage of the review will report within months, considering market stability, liquidity, and diversity. A second phase will examine the wider pension landscape.

Barclays CEO C. S. Venkatakrishnan welcomed the government’s “timely review,” highlighting that pension reforms are crucial for unlocking institutional investment in growth equity.

Attribution: Reuters.