Chancellor Rachel Reeves proposes new megafund pension plan

By Jess McHugh

Financial Graph by Maxim Hopman

Chancellor Rachel Reeves announces the plan to create pension mega-funds to increase investments in areas such as energy infrastructure, tech start-ups and public services. This plan is designed to replicate Australia and Canada’s pension schemes. Reeves’ plan is to merge 86 council pension schemes in hopes it will deliver around an £80 billion investment into the UK.   

Reeves believes that the current state of the UK pension funds do not generate enough return. This is backed by evidence showing the UK to be one of the countries with the lowest pension funds. Those who work in government will not experience a change to their payments once this plan is implemented.  

Older gentleman by Tatiana P

The Chancellor’s confidence in this plan comes from both Canada and Australia using this suggested approach, as their pension schemes invest more in infrastructures than the UK. Canada invests around four times more with Australia also being around three times more.  In 2023 the UK pension scheme was £1,123 billion this meaning that Canada’s pension scheme would be around 4.8 billion and Australia's around 3.6 billion. 

Information gathered from a PensionBee survey tells us that the annual growth of pensions has been increasing to as high as 8% for those 30 years from retirement (34%). Their findings also show that savers might be underestimating the growth potential of their pension savings, as over a third of savers aged 18-54 are foreseeing returns between 5%-7%. Meaning some people who are seeing growth may see potential changes towards the pension scheme as concerning.  

This will leave some thinking how will this affect my pension?   
 
To those concerned the government are considering putting in place a minimum size necessity for this scheme, meaning that it may affect the rate at which your pension savings grow.  Reeves has admitted that she wants the UK pension scheme to closely resemble Canada and Australia’s approach, which means the pensions of those that are to be considered government workers like teachers, social workers, care assistants, and refuse collectors are pooled into funds to allow for large global investments.