UK Government Plans Pension Reform Megafunds

The UK government, led by Chancellor Rachel Reeves, is set to announce major reforms in the pension sector that aim to create 'pension megafunds' by consolidating local government pension scheme assets and defined contribution schemes. This initiative is designed to unlock approximately £80 billion for investment in infrastructure and businesses, marking the most significant pension reforms in decades. The proposed reforms draw inspiration from successful models in Canada and Australia, where larger pension funds are able to invest significantly more in high-growth assets. Reeves emphasized that these changes will enhance pension returns for savers while supporting economic growth. The plan involves pooling resources from 86 separate local government pension funds into fewer, larger, professionally managed funds, which are expected to yield better investment outcomes. However, experts have cautioned about the risks associated with using pension funds for driving economic growth.