Martin Willis, Partner at independent consultancy, Barnett Waddingham (BW) said: “The government’s push for £25bn pension ‘megafunds’ is the latest step in a long-standing drive toward consolidation, and eventual investment in private markets. But while scale can bring benefits like investment access, efficiency, and improved governance, it’s not a silver bullet.
"Many smaller, well-run own-trust schemes already deliver strong, member-focused outcomes and forcing consolidation risks losing that added value. Instead, the government should focus on removing the real barriers – such as legacy guarantees – while offering practical support, including indemnities for schemes that want to consolidate but face structural and legacy hurdles.
"Supporting UK growth is a worthwhile goal, but fiduciary duty must remain at the heart of any reform. Bigger isn’t always better – it’s outcomes that matter most.”
Rachel Croft, Chair of the Association of Professional Pension Trustees (APPT) commented: “We look forward to working with government as it develops its Pension Review and proposals for the Bill in greater detail, and we will of course engage closely with ministers throughout the upcoming consultations.
“As trustees our primary duty is to ensure we deliver the best outcomes for members. While we know government is keen to develop larger pools of capital for UK-specific investment, our focus will always be on what actually provides the best risk-managed returns for our members.
“This means that trustees will invest wherever they can get the best risk-adjusted rate of return, with sufficient liquidity, to meet the specific investment objectives of the scheme. In short, if suitable investible UK assets are available which meet these criteria, trustees will invest in them; if this is not the case then this will prove much more difficult.”
António Simões, Group Chief Executive Officer of L&G said: “Today’s announcements mark further important progress in unleashing the full power of the UK’s pensions pots. We share the Government’s ambitions and believe these reforms are an opportunity to deliver stronger outcomes for DC and DB savers whilst helping to maximise investment in the UK economy.
“A crucial part of this puzzle that remains unresolved is how we will address pensions adequacy, so UK savers are set up for retirement. This is critical to both the financial resilience of individuals, and the UK’s long-term economic health, and will only be achieved by increasing savings levels. We have an important window of opportunity to act and urge the Government to start this important work as soon as possible.”
Stewart Hastie, Chair of the Association of Consulting Actuaries (ACA) said: “We welcome the opportunity to comment and shape the latest raft of pension reforms designed to provide enhanced value for pension savers whilst also looking to boost UK investment performance. On surplus release, we have been vocal in our support for reforms here and are pleased to see that proposals that will allow trustees and sponsors to release surplus on an ongoing basis helping to create a level playing field across all schemes. We look forward to reviewing the detailed legislation and regulatory guidance in due course to promote a flexible regime that builds on scheme specific funding and incentivises schemes to develop a long-term sustainable plan for investment and surplus release with appropriate safeguards for members’ benefits. In particular, the legislation together with Pensions Regulator guidance will need to bring clarity to trustees and sponsors to conclude how and when surplus release is appropriate. We also would like to see the Government bring forward the necessary pensions tax reforms to increase flexibility on how surplus is used – for example, making it easier to use DB surplus to fund current employee pensions in another trust; and paying lump sum benefits to members of DB schemes that could be more meaningful and less risky than increasing lifetime pensions.” ACA DC Committee Chair, Tess Page, added: “We support consolidation “done right”, in order to address fragmentation and seek to improve outcomes for savers. The announcements on scale tests, and the timeframe for meeting the tests, will bring a sharp focus to providers – and not all will survive. We view as positive that there will still be a route for innovators to enter the market. We acknowledge and welcome the desire not to burden employers by imposing new obligations on employers in relation to pensions oversight, but time will tell whether we see the required shift away from cost to value. In this vein, we consider the proposed Government review in 2029 of the impact of the VFM framework, contractual override provisions, and other reforms will be helpful in testing whether the best outcomes for members are being achieved and adapting the roadmap of change if necessary.”
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