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Chancellor Rachel Reeves is to lay out plans today to create pension “megafunds” in a drive to to increase infrastructure investment.
Reeves will tell the City tonight that she will introduce a new pensions bill next year, to pool assets from the 86 separate local government pension schemes (LGPS) into larger vehicles.
Those 86 defined-benefit schemes cover 6.5 million members and £360bn in assets. Putting them into larger pots would create a set-up similar to those in Australia and Canada, where single large pension funds managed by professional investors invest more in infrastructure.
The chancellor will tell an audience of City leaders and chief executives at the Mansion House tonight that the plan could unlock £80bn of investment.
Reeves says: "Last month’s budget fixed the foundations to restore economic stability and put our public services on a firmer footing. Now we’re going for growth.
"That starts with the biggest set of reforms to the pensions market in decades to unlock tens of billions of pounds of investment in business and infrastructure, boost people’s savings in retirement and drive economic growth so we can make every part of Britain better off."
But there are concerns that the plan could put people’s retirement savings in danger.
Tom Selby, director of public policy at AJ Bell, fears that the interests of savers may be left behind as ambitious measures could put savers’ money at risk and undermine their retirement goals.
Selby says: "The government’s hope will be that by moving from having 86 local government schemes down to a single one, or a few, will benefit from economies of scale. My overarching concern is that the needs of the saver, whose money is ultimately going to be risked, will be forgotten about. There’s a reason that an occupational scheme has a trustee to look after the interests of members. Part of that is investing their money to maximise returns and get the best retirement outcomes possible."
Selby adds: "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 will go the other way, so there needs to be some caution in this push to use other people’s money to drive economic growth.It needs to be made very clear to members what is happening with their money. One of the strengths of the system we have today is that investment decisions for members of defined contribution (DC) default funds and defined benefit (DB) schemes have independence baked in, usually via the appointment of trustees. Those trustees are required to make those decisions first-and-foremost with the aim of delivering the highest possible income in retirement for members."
Meanwhile, UK tenants are facing a “chasm” when trying to find a property to rent, surveyors are warning, as demand rises and the supply of rental properties falls.
The Royal Institution of Chartered Surveyors (RICS) has reported that renters are being squeezed by lower supply and rising prices in the lettings market. A net balance of +19% of surveyors polled reported that tenant demand in their area increased over the last three months.
At the same time, landlord instructions, which measures how many landlords are making their property available for rent, fell over the quarter.
RICS’s UK Residential Market Survey found that a net balance of +33% of respondents expects rental prices to be driven higher over the coming three months, due to this mismatch between supply and demand.
RICS says that “woes for renters persist” as rental properties continue to disappear from the market and demand remains resilient in most regions. The RICS president, Tina Paillet, said: "Our data continues to indicate that renters are feeling the pressure from a limited supply of rental properties and rising rents. While the autumn budget announcement of immediate stamp duty increases for landlords acquiring rental properties may increase opportunities in supply for owner-occupiers, it will make it more challenging to address the critical shortage of rental homes."
RICS’s latest monthly survey also found that UK house prices continued to rise in October, although they did drop in Yorkshire and the Humber, and the South West of England. More surveyors expect prices to rise over the next year than to fall.
RICS says: "Virtually all parts of the UK are expected to see a rise in house prices in the year to come, led by firm growth across Northern Ireland and Scotland."
The agenda
• 9.30am GMT: UK mortgage and landlord possession statistics: July to September 2024
• 10am GMT: IEA’s monthly oil market report
• 10am GMT: Eurozone GDP for Q3 2024
• 10am GMT: Eurozone employment report for Q3 2024
• 1pm GMT: Bank of England policymaker Catherine Mann gives a speech on “Revitalising the global economy”
• 1.30pm GMT: US PPI index of producer price inflation for October
• 1.30pm GMT: US weekly jobless claims
• Tonight: Mansion House speeches from Rachel Reeves and BoE governor Andrew Bailey
We’ll be tracking all the main events throughout the day ... |
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