Labour to Create Pension Megafunds to Boost Economy

This is not a new plan from Whithall, as it was in discussion when the Conservatives were in power, but Rachel Reeves (Chancellor), in her Mansion House speech has confirmed that Labour will introduce the ‘biggest pension reform in decades’.

The reforms are initially tasked with merging the UK’s 86 local government pension schemes (LGPS) into one ‘supertanker’ scheme, thereby ‘pooling’ £350+ billion to then invest in UK projects such as energy infrastructre, public services and tech start-ups.

Your local government/local council defined beneft terms and benefits will not be affected but it will be a national scheme rather than local. It will also deliver economies of scale in terms of 86 sets of charges and running costs, there will be one set of charges/management infrastructure costs.

Defined Contribution Schemes

In addition, the government also wants to restrict private investment linked funds (as as those pooled private, SIPP, money purchase, group pension schemes etc to a maximum size before central controls may take over governance. 

There is £800bn invested in DC schemes held by all the usual pension companies as well as ‘big employer’ schemes.

Comment

Where is it piublic services e.g., local government, that is funded by the ‘people’ then we do believe it shoould have some investment control by the government to encourage UK investment and development rather than investing overseas.  That said, where it is a private, pension company then we do not believe the government should dictate where those fund managers invest.  It is healthy to have competition and it will be healthy for giovernment ‘pooled’ schemes to be benchmarked and judged against private sector schemes.