Bank of England Warns Against Government Mandated Pension UK Investments

Bank of England Governor Andrew Bailey has strongly opposed Chancellor Rachel Reeves' proposal to mandate pension funds to invest a minimum proportion in UK assets, warning that such government intervention is inappropriate and could undermine pension trustees' duty to act in savers' best interests. The government plans to include a backstop power in the Pension Schemes Bill allowing ministers to compel pension schemes to invest more in UK infrastructure and private markets, aiming to boost economic growth and unlock billions for British businesses. Despite a voluntary agreement with 17 major pension providers to allocate 10% of default funds into private assets, including at least 5% in UK assets by 2030, critics caution that private markets carry higher risks and costs. Alongside investment shifts, the government is advancing broader pension reforms, including consolidating small pension pots, enhancing value-for-money requirements, and enabling large multi-employer 'megafund' schemes to reduce costs and improve returns. However, experts warn that proposed increases in employer pension contributions could strain businesses already facing financial pressures, potentially leading to redundancies and reduced job opportunities. The debate underscores tensions between government ambitions to support the economy through pension investments and concerns over safeguarding savers' interests and business viability.