Chancellor Proposes Pension Megafunds for Investment

Chancellor Rachel Reeves is set to announce a major overhaul of the UK's pension system in her first Mansion House speech, which aims to create 'megafunds' that could unlock up to £80 billion for investment in businesses and infrastructure. The proposed reforms include consolidating the assets of 86 local government pension schemes, currently managed by various authorities, into a few larger funds, allowing for more efficient and productive investments. These changes are inspired by successful models in countries like Canada and Australia, where larger pension funds have yielded higher returns by investing more significantly in infrastructure. The government plans to introduce a Pension Schemes Bill next year to facilitate this consolidation and may also require minimum sizes for defined contribution schemes. While the reforms are anticipated to drive economic growth, concerns have been raised regarding the potential risks to individual savers' needs. The Treasury assures that the funds will be regulated to protect savers' interests.