A “landmark pensions review” launched by Rachel Reeves, the recently appointed Chancellor of the Exchequer within the U.K. government, will focus on boosting investment returns in the sector in its first phase.
The review will look to boost investment, increase U.K. savers returns and tackle waste in the pensions system, according to an initial “Terms of Reference” document published by His Majesty’s Treasury.
This initial document focuses on defined contribution workplace schemes such as the £36 billion ($47 billion) National Employment Savings Trust, London, and the defined benefit Local Government Pension Scheme.
A Terms of Reference focusing on the wider defined benefits pension landscape in the U.K. is also anticipated in the near future.
Reeves has appointed Emma Reynolds, the U.K.’s minister for pensions, to lead the review.
A wide-ranging pensions review was a manifesto pledge from the Labour Party, which took control of the U.K. government following a general election victory in July.
Last week, Reeves visited Canada to learn about the nation’s ‘Maple 8’, its largest public pension funds, with a view to potentially implementing similar strategies in the U.K., such as increasing alternatives allocations and improving governance standards.
The upcoming review also look at how tackling fragmentation and inefficiency can unlock the investment potential of the £360 billion ($462 billion) LGPS, with a view to increasing consolidation in the space.
“There are significant opportunities for the government to help the industry to improve outcomes for DC pension savers," Paul Waters, head of DC markets at consultancy firm Hymans Robertson, said.
“For example, building on the success of auto-enrolment to raise pension saving rates, leveraging the increasing scale of today’s DC schemes to access new investment opportunities, and enabling more sophisticated default retirement propositions to be introduced.”
In the initial upcoming pensions review, Reeves said there is “no time to waste,” as improvements within investments could unlock billions of pounds from defined contribution plans alone, and individual pension pots could see an increase by over £11,000.
This followed a Pensions Schemes Bill being announced by the incoming Labour government during King Charles III’s speech at the opening of the U.K. Parliament in July.
