In her inaugural Mansion House speech, the Chancellor announced reforms to create pension ‘megafunds’ in an attempt to boost investment and economic growth. The start of this process, the DWP’s consultation on Pensions Investment Review for DC schemes closes next week.

Rachel Vahey, Head of Public Policy, AJ Bell, comments on the Government's plans to revolutionise pensions and how the consultation will set out its basis to drive consolidation on a massive scale.

The proposals to create pension megafunds are being billed as the first step in a pensions revolution. The government has its eye firmly on tapping into pension funds as a potential source of new UK investment, and for that to work the current landscape of thousands of schemes needs to be consolidated into a few. 

This consultation is the start of that process. But size shouldn’t be the overwhelming factor. Whether a scheme offers good value is not just how big it is, but whether it provides good outcomes for pension scheme members. 

It’s imperative we don’t forget about the pension saver at the heart of this revolution. Conflating a government goal of driving investment in the UK and people’s retirement outcomes brings a danger because the risks are all taken with members’ money. If it goes well, everyone can celebrate. But it’s clearly possible that it could go the other way, so there needs to be some caution in this push to use other people’s money to drive economic growth.

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✉️ Rachel Vahey, AJ Bell, 07803 624146 / rachel.vahey@ajbell.co.uk