Rachel Reeves is set to announce a major overhaul of the pension fund industry in the UK during her upcoming Mansion House speech. This proposal aims to unlock billions of pounds worth of investment in the country. The speech, scheduled for November 14, will also cover Labour’s plans to get more workers into jobs and strengthen the government’s industrial strategy. Reeves is particularly interested in implementing a Canadian-style reform that would merge Britain’s local authority pension schemes into a single fund, which is currently valued at around £400bn.
City leaders have been calling for changes to Britain’s risk culture, especially as the allocation of UK pensions to domestic equities has decreased over the years. Instead, defined-benefit schemes have been relying more on bonds, with some holding £225bn in surpluses. There are concerns among some retirement schemes that Reeves may mandate UK funds to invest in specific asset classes, such as British stocks or infrastructure, which could lead to purchasing lower-quality assets. However, the government has not expressed support for such mandates.
A Treasury spokesperson highlighted the Chancellor’s focus on growth and the importance of pension reform in fueling the government’s growth mission. Reeves has been exploring different models, including the Canadian approach, and has engaged with leaders from Canada’s largest pension funds to gather insights and best practices. The ultimate goal of the proposed reform is to boost infrastructure investment and support the London stock market.
The upcoming Mansion House speech is expected to provide more details on the pension reform plan and its potential impact on private investment in the UK. This initiative comes on the heels of Labour’s recent Budget announcement, which included significant tax rises and additional borrowing over the next five years. Reeves is positioning pension reform as a key component of Labour’s economic growth strategy, with the aim of stimulating investments and driving forward the government’s growth agenda.
