London (Parliament Politics Magazine) – Chancellor to deliver first Mansion House Speech on Thursday evening, expected to announce pensions market reforms aimed at boosting investment Growth in UK Infrastructure.
Rachel Reeves tells BBC News that UK Public sector pension funds are insufficient to secure strong returns.
Pension Mega Funds” planned by the government to drive infrastructure growth.
According to Treasury plans, reforms aim to “Unlock ÂŁ80bn” in investment by promoting pension funds for greater returns.
Chancellor Reeves seeks to reshape UK pensions by adopting Canadian and Australian Models.
More details of her plan will be revealed tonight during a speech at Mansion House.
Approximately 90 local government pension funds will be combined, merging defined contribution schemes and assets pooled. This is part of the government’s initiative to raise economic growth by investing in infrastructure.
The government states that pension schemes can secure better returns when their size reaches between ÂŁ20bn to ÂŁ50bn as they are “better placed to invest in a wider range of assets”.
According to the government, data from Canada and Australia second the evidence, with Canada’s pension schemes investing four times more in infrastructure and Australia’s schemes three times more as compared to the UK’s defined contribution plans.
Reeves called the move “the biggest set of reforms to the pensions market in decades”.
She added, “Our pension funds in Britain are too small to be making the investments that get a good return for people saving for retirement and to help our economy to grow. no sense at all” that Canadian teachers and Australian professors were more likely to be invested in many long term UK assets than savers in Britain.
Chancellor Reeves added that it was “no sense at all” that Canadian teachers and Australian professors were more likely to be invested in long-term UK assets than British savers.
The pension minister, Emma Reynolds, while speaking to the press, said “government is setting forward a very ambitious set of reforms this evening to create pension mega funds, which essentially would be bigger, fewer pension funds in the UK to invest in big infrastructure projects and high growth companies”.
She quoted the examples of Canada and Australia, and said “they invest three times more in infrastructure and ten times more in private equity”.
The director of public policy at financial company AJ Bell, Tom Selby, said “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”.
The government says that funds will be regulated by the Financial Conduct Authority and will be required to “meet rigorous standards to ensure they deliver for savers”.
Some critics have raised concerns that the plans could put saver’s money in potential danger.
Head of retirement policy at wealth manager Quilter, Jon Greer, said: “Large funds need substantial, reliable projects to generate returns, but the market may struggle to offer enough of these opportunities, especially in the infrastructure sector”.
He warned that, if“ too much money chases too few viable investments” funds might be forced into “riskier” investments.
Shadow chancellor Mel Stride told the Conservatives, “will be looking closely at the detail of what Rachel Reeves sets out – particularly regarding the mandating of where investments are to be made”.