‘Change is going to come’, pensions minister tells industry
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The government will stick with the timeline of March 2026 for the Local Government Pension Scheme to move to a new pooling model, the pensions minister has said. Elsewhere, he aims to introduce the pension schemes bill before parliament's summer recess and suggested that part two of the Pensions Review will still go ahead.
The government is looking at LGPS pools’ proposals to see if they meet what the government's consultation outlined last year, said Torsten Bell, in office only since the middle of January. He said this will happen “as quickly as possible”.
Speaking at the Pensions and Lifetime Savings Association’s Investment Conference on Tuesday, Bell confirmed the government will stick to the timeline of March 2026, noting that he will be meeting with each pool in the next few weeks.
The former policy adviser added: “By this time next year, our world class LGPS will be made up of large pools with professionally managed capital, accountable to authorities by robust governance structures and delivering for members and their communities."
He also highlighted that the government’s planning and infrastructure bill was introduced on Tuesday.
Pensions adequacy: Focus is on returns
Meanwhile, the Pensions Review will be finalised “in the coming weeks", he remarked. Following media reports last year, Bell addressed concerns the government has let the adequacy part of the review fall under the table, saying: “I'm not going to pre-empt that here, but just to be very clear, I've read some reports in some parts of the media saying this is for the long grass, it's not going to happen anytime soon, some even telling me that we or I have cancelled it. It turns out you shouldn't believe everything you read in the press.”
However, he argued that higher returns were the pensions problem of today and that the pensions industry has been focussing too much on contributions in seeking to improve adequacy, saying he was now “rebalancing the conversation”.
"I'm just gently nudging that savings rates and returns are what determines living standards in retirement. And I hear too much of people saying just one of those,” he said.
Analysis by consultancy Barnett Waddingham found that during 2024, the strongest performer in the DC growth phase returned 23.3%, with the weakest still returning 8.9%. High performance was largely driven by reducing bias to the UK stock market in favour of the US.
The Department for Work and Pensions published analysis last year which suggested weak correlation between size and five-year gross performance.
UK DC pension providers, assets under management by annualised gross returns for younger savers over the last 5 years
Source: DWP, ‘Pension fund investment and the UK economy’
Will UK investment need to save democracy?
Bell also had a warning. Without greater domestic investment to grow the economy, people’s faith in mainstream politics will be undermined, he said, arguing that the pensions industry is one part of what is needed to address a bigger threat.
“This is not some fluffy 2004, ‘Let's have a pension commission’. We can all agree if you're staying for that, I'm afraid you're showing a naivety about the nature of where British politics and Britain is. The stakes are much higher than that,” he said as he chided the industry for asking for a pensions commission on various topics.
Government needs to take unpopular decisions “to make sure we can do the basics again”, he claimed.
“Sometimes people say to me, ‘Oh, that's a risk. You know, it's an economic risk.’ I'll tell you what the economic risk is: us not doing these things. And then you will all be saying to me in 10 years’ time, how come people are voting for mad people? And the answer would be because we didn't deliver the change that was needed. So this whole technocratic notion that we can take the politics out of it, I'm afraid there's people living in la la land,” Bell told industry representatives.
The MP for Swansea West did not reveal if there can be exceptions on minimum size requirements for DC default funds but added that the trajectory will mean “we'll be in a materially different place”.
He said: “The status quo is not okay. We cannot carry on with Britain being the lowest investor in the G7. The cost to families, to their communities, to our businesses, is far too high. So change is going to come."
Do you believe consolidation will lead to more UK investment?
