UK initiates pensions system review

Labour government aims to boost economic growth and improve retirement incomes

LONDON:

Britain's new Labour government has initiated a review of the pensions system, aiming to channel more investments into productive assets to boost economic growth and enhance retirement incomes, according to an announcement on Saturday.

Prime Minister Keir Starmer, whose government has made tackling the country's sluggish growth a core priority since winning the July 4 election, is spearheading the review.

In its first legislative package, the government introduced a new Pensions Schemes Bill last week, which aims to encourage the consolidation of smaller pension schemes and 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," Finance Minister Rachel Reeves stated. "I am determined to fix the foundations of our economy."

Defined contribution schemes are projected to manage approximately 800 billion pounds ($1 trillion) in assets by the end of the decade. Increasing their investment in productive assets could significantly boost the economy and aid in infrastructure development, the Treasury noted.

The review will also explore ways to enhance the investment potential of the 360 billion pound Local Government Pensions Scheme (LGPS), which manages savings for local authority workers across Britain. The LGPS, currently fragmented across nearly 90 funds, could benefit from consolidation to reduce waste, the government suggested. It indicated that if insufficient progress is made by March 2025, legislation to mandate pooling the funds might be considered.

Reeves and Pensions Minister Emma Reynolds are set to chair a roundtable with the pensions industry on Monday.

The initial stage of the review is expected to report within months, focusing on gilt market stability, liquidity, and diversity. A subsequent phase will address the broader pensions landscape.

Barclays has expressed support for the government's "timely review" of the pensions sector. "Pensions reforms are critical to unlocking institutional investment in growth equity," stated the bank's chief executive, C. S. Venkatakrishnan.