Government to Reshape Pension Landscape
The Government has announced plans to make big changes to how major pension schemes are run. Under the new rules, some large pension funds will be required by law to invest more in UK-based projects.
A key part of the plan is to create large pension “megafunds” that each manage at least £25 billion in assets. This will mainly affect Local Government Pension Schemes (LGPS) and multi-employer defined contribution (DC) schemes, such as NEST, which combine the savings of employees from many different companies.
At the moment, LGPS pensions are spread across 86 different local authorities, managing just under £400 billion in total. The new rules will reduce this to just six larger funds. Multi-employer DC schemes will also be consolidated. Any scheme with less than £25 billion in assets by 2030 will need to show how it plans to reach that level by 2035—or it could be merged with another scheme.
Focus on UK-Based Investment
Alongside this consolidation, the Government wants to see more of this pension money invested back into the UK economy. It will pass new laws, under the Pension Schemes Bill, to give itself powers to set minimum targets for investing in UK projects.
Although some major pension providers have already agreed to do more of this voluntarily, the new law means it could become mandatory. Investments may include big infrastructure projects, such as the Lower Thames Crossing, energy upgrades under Clean Power 2030, and developments in housing, science, and technology.
What Does This Mean for You?
These changes only apply to LGPS and multi-employer DC schemes. Private pensions, SIPPs, and ISAs will not be affected at this time.
It’s always worth checking where your pension is invested and whether it’s helping you meet your retirement goals. A financial planner can help you decide if your current setup is right, and what changes—if any—you should consider.
If you’re unsure how these changes might affect you, don’t rush to act. Take advice from a qualified planner who can help you understand your options and make informed decisions.