Consolidation of workplace and local government pension schemes will be at the heart of the Treasury’s flagship Pensions Review.
Policymakers will also continue a focus on value for money, rather than cost alone, in the first stage of the review and ministers hope the combination of measures will drive both greater investment in the UK economy and ultimately improved outcomes for pension scheme members.
However, those responsible for setting long-term pension investment strategies will need to remain focused on the needs of savers.
Tom Selby, director of public policy at AJ Bell, comments: “The new government has made no secret of its desire to harness the trillions of pounds of assets held by UK pension schemes to help drive greater investment in UK Plc and, ultimately, spur long-term economic growth. The initial phase of this landmark Pensions Review is focused squarely on workplace pension schemes and local government schemes, with ministers hoping consolidation of this fragmented landscape will both improve outcomes for savers and boost investment in UK assets, with a particular emphasis on private equity.
“Given the stagnant growth the UK economy has experienced since the 2007/08 financial crash, the increasing desperation of policymakers to solve the productivity puzzle is understandable. If stable, long-term economic growth can be achieved, that means more money for public services and potentially less need to bring forward unpopular tax hikes.
“However, it is vital the interests of savers, whose money is ultimately being used here, are not sidelined as a result. Successive governments have made dangerous claims that a shift to riskier investments will deliver larger pension pots for people, despite the inherent uncertainty that exists in this area, particularly when considering investment returns over decades. It is, of course, entirely possible that investing more in the UK will yield better returns and bigger pension pots – but it could also go the other way.
“Trustees and those responsible for looking after members’ interests therefore have a crucial role to play in ensuring investment strategies are designed with the aim of delivering good outcomes for those who will ultimately rely on those pensions in retirement. The risk in conflating government economic goals with those of pension savers is that the latter will be sacrificed in order to deliver the former.”
