On increasing allocations to UK assets and infrastructure
“The Pension Schemes Bill confirms the Government’s stated direction of travel last week of inserting a backstop law to firmly twist – if not mandate – the pension industry’s arm towards what it perceives as sufficient allocations to UK assets and infrastructure. There continues to be a potential conflict, particularly if mandated, between a pension scheme’s fiduciary responsibility to maximise savers’ retirement outcomes (i.e. investing in assets with optimal risk/return profiles) and the advantages to the UK economy. While billions of pounds of investment into the UK economy will have obvious advantages, UK pension savers are inherently exposed to risks in the UK economy in their day-day lives so increasing this risk may not be optimal, nor is it guaranteed that the returns yielded will be better than those on offer globally.”
On consolidation
“Bigger is better for the Government as it presses ahead with plans to force consolidation of Local Government Pension Schemes into a handful of ‘mega-funds’ and mandate a minimum size for defined contribution pension schemes. A fewer number of larger schemes should certainly deliver better value for members by creating the scale required to reduce fees and operate the scheme more efficiently. A balance needs to be struck between a competitive market which inherently drives down cost and sufficiently large schemes which can leverage their scale to improve efficiency/cost, not to mention the distinct advantage of having to regulate fewer schemes, so it is pleasing that the Bill has softened in stance towards schemes under £25billion which will be allowed to continue operating if they see a road path towards reaching that size within ten years.”
On small pots
“Further measures to make consolidation of small pension pots easier is welcomed, especially in tandem with the Pensions Dashboard due to come on stream later this decade. Recent research from the DWP showed that the number of deferred pots worth less than £1,000 across five large providers had grown rapidly since 2020 from 8.3 million to 11.2 million in 2024 highlighting the urgency of the issue.”
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