Pensions minister: Big is beautiful – and better

Pensions minister Torsten Bell was unapologetic about the government’s focus on scale in its programme of reform in his opening address to the Pensions and Lifetime Savings Association’s (PLSA) investment conference in Edinburgh.

While both costs and savings rates are important, the focus must be on returns, he said.

“Celebrating the success of auto-enrolment can no longer be a substitute for answering the harder question,” said Bell. The government’s view was that “scale does matter” and it wants wants to see “fewer, bigger, better pension schemes”.

Bell acknowledged that, while some small schemes offer their members good value, consolidation is “desirable” for the market as a whole as larger schemes can access productive asset classes. These assets were, he argued, “a diversification as important as geography”.

Scale is an “enabler of change”, said Bell, but “is very far from the silver bullet” and “only one part of interlocking reforms to focus more on value and less narrowly on costs”.

This included the reappraisal of private assets. He cited data on defined contribution (DC) allocations showing investment of just 3% to UK infrastructure and 0.5% to private equity, compared with an average 11% infrastructure allocation by Canadian pension schemes and 5% by DC schemes in Australia.

“Every percentage point – or half percentage point – matters when this investment can deliver not only returns to savers, but also contribute to economic growth,” the minister explained.

“It’s time for Britain to start investing in its future.”

In the first phase of the government’s Pension Investment Review, it called for DC schemes to consolidate into “megafunds” of at least £25 billion in assets. However, Bell said he was “very pragmatic” on size.

Creating a productive assets pipeline
Bell said the government was working to create a pipeline of infrastructure assets, and to make it easier to for these assets to be built.

“We have already got back into the habit of swiftly granting permissions of the likes of solar farms and reservoirs – permissions that previous policymakers seem to have decided that Britain could do without,” he explained.

The government yesterday (11 March) introduced the Planning and Infrastructure Bill that Bell said was designed to ensure that homes and infrastructure are built.

“If we’re going to invest once again, we have to make it possible to build once again,” the minister stated.

Elsewhere in his address, Bell confirmed that the eagerly anticipated Pension Schemes Bill will be put before parliament before the summer recess in July.

The minister would not be drawn on details for continued Local Government Pension Scheme consolidation, but said the March 2026 pooling deadline remained in place for all assets to be pooled and pools to be authorised by the Financial Conduct Authority.