Pensions review by Chancellor Rachel Reeves to boost UK economy
Chancellor Rachel Reeves has initiated the first phase of a significant pensions review aimed at driving economic growth and improving the financial wellbeing. This pensions review is part of the government’s mission to enhance prosperity across the UK.
The plan targets unlocking billions of pounds in the UK economy from defined contribution (DC) pension schemes, potentially boosting pension pots for savers by over £11,000.
Additionally, the pensions review will explore the investment potential of the £360 billion Local Government Pensions Scheme (LGPS), which supports local service workers, while addressing the £2 billion annual expenditure on fees.
First phase of the pensions review
The initial phase, led by Emma Reynolds, the first joint Treasury and Department for Work and Pensions (DWP) minister for pensions, will report in the coming months. This phase will concentrate on identifying actions to enhance investment and improve pension outcomes.
The subsequent phase, beginning later this year, will further address steps to enhance pension outcomes and boost investments in UK markets, including an assessment of retirement adequacy.
Pensions industry engagement
Reeves and the pensions minister will chair a roundtable with the pensions industry to commence intensive engagement for the review. Rachel Reeves stated, “Despite a challenging inheritance, this new government is committed to driving economic growth and improving lives. This review is part of a series of reforms to unlock growth, boost investment, and deliver savings for pensioners.”
Deputy Prime Minister Angela Rayner emphasised the importance of ensuring dignity and security in retirement for frontline workers, noting, “We aim to make sure their hard-earned money works harder for them, ensuring they receive the pensions they’ve earned while unlocking growth across our economy.”
Goals of the review
The government aims for DC schemes to manage around £800 billion in assets by the decade’s end, exploring ways to increase investments into productive assets. Even a 1% shift could mean £8 billion in new investments, fostering economic growth and infrastructure development while providing higher returns for savers.
The review will consider greater consolidation of DC schemes to enhance returns through broader investment strategies. For the LGPS, the government may legislate for pooling if progress is insufficient by March 2025, enabling investment in a wider range of UK assets and reducing fees.
Matt King of RPG Crouch Chapman Financial Services added “ The review aims to unlock investment potential, and secure better retirement outcomes. My personal takings from this review is that there may be a requirement for a percentage of pension investments that must be invested in UK companies, like the objectives of the British ISA, but this time with pension assets. This investment percentage may be small, as low as 1%, we don’t know yet, it is only rumour, we eagerly await the outcome of this review.”
If you would like to discuss how these changes might impact upon your pension planning or if indeed you would like to discuss any area of wealth management with our team at RPG Crouch Chapman Financial Services you can contact us on 020 7870 9050.
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