PLSA leads engagement efforts over megafunds plans

The Pensions and Lifetime Savings Association (PLSA) has written to chancellor Rachel Reeves outlining the significant levels of UK investment already supported by pension schemes.

The move was in response to the chancellor’s Mansion House speech on 14 November, in which she set out proposals to accelerate consolidation within the Local Government Pension Scheme (LGPS) and among private sector defined contribution (DC) pension schemes.

The letter was co-signed by pension schemes and service providers including Railpen, Cushon, the Universities Superannuation Scheme, West Yorkshire Pension Fund, Nest, Smart Pension, Brunel Pension Partnership, WTW, Legal & General Investment Management, Surrey Pension Fund, Peoples Partnership, West Midlands Pension Fund, Border to Coast Pensions Partnership and LGPS Central.

The organisations argued that the pensions sector was a “great UK success story” and had already backed UK assets with almost £1 trillion of investment across equities, corporate and government bonds, and other asset classes.

Strong UK economy is “better for retirement outcomes”
“Growing the UK economy is rightly a priority for the government and as an industry we are working hard to do more to support this goal,” the letter stated. “A strong UK is better for retirement outcomes…

“Of course, at the core of schemes’ responsibilities is the need to ensure their investments meet the needs of scheme members in line with their fiduciary duty.”

The pension schemes said they supported consolidation “when it is done in the interests of members and represents value for money”, as larger schemes can be run more efficiently and negotiate better deals on investments and other services on behalf of their members.

On the LGPS proposals, the letter set out the significant cost savings and other efficiencies already achieved through pooling, but acknowledged that more could be done.

“A lot of good work is already in place across the LGPS, and administering authorities and pools should take care further work is done in a pragmatic way which maintains value and does not incur unnecessary investment losses or costs,” it stated.

The government has proposed to give the pools more powers, including providing strategic advice to underlying local authority pension schemes. The letter did not address this directly, but expressed support for other aspects of the consultation including increasing local investments.

Don’t forget DB, schemes urge
On the DC reforms, the letter supported the overall aims to consolidate and improve governance standards, but it also emphasised that there were significant barriers to combining different kinds of pension schemes.

Tackling these barriers would be “key” to the success of the government’s plans, the letter said.

Other initiatives such as the Value for Money regime and ongoing work to develop pensions dashboards will help improve the DC landscape, the signatories wrote.

“Moreover, as the industry eagerly anticipates part two of the Pensions Review, we hope to see further measures brought forward that look at the long-standing issue of pensions adequacy, that set out a roadmap to address the level and scope of current automatic enrolment contribution rates,” the letter stated.

“We would also welcome further clarification on government ambitions for the future of defined benefit schemes, especially around the treatment of open schemes, surplus sharing and consolidation measures in this area.”

Consolidation must be done “pragmatically”
PLSA chief executive Julian Mund said engaging positively with the government on the proposals would support “greater value for savers” as well as long-term economic growth and the UK’s net-zero targets.

“Consolidation, stronger governance, and economies of scale will drive better outcomes for members, but it must be done pragmatically,” Mund continued.

“By aligning with government proposals and safeguarding fiduciary duties, we can secure the best possible future for savers while boosting investment in UK assets and ensuring the system remains globally competitive.”

In response to the letter. Reeves said: “The Mansion House reforms I announced support growth in the financial services sector and help finance investment across the country.

“I want to work with industry and stakeholders to deliver pension reforms that increase investment in infrastructure, boost people’s pension pots and grow the economy.”