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Commenting on the Chancellor’s plan to create pensions “megafunds” announced ahead of her Mansion House speech this evening, Ian Bell, Head of Pensions at 91̽�� said: “Building on the Mansion House proposals put forward by the previous Chancellor is sensible, but unless the Chancellor can pull a rabbit out of the hat tonight, how Rachel Reeves can make investing in UK infrastructure, tech and public services an attractive option for pension schemes remains unclear. The big question for her to answer is “why”? Why should trustees or individuals invest their pension assets in the UK, as opposed to looking for better returns globally? And from a DB (Defined Benefit) perspective, why should CFO’s allow trustees to take on more investment risk than they need to, if their funding is already at a reasonable level?

“The Chancellor plans to target the public sector local government pension schemes to pool assets and increase their investment capabilities. But having done so, can the government exercise more influence over how the trustees of those schemes invest? And when it comes to the billions invested in private sector DB or DC (Defined Contribution) schemes, the benefit for them remains unclear. 

“Linked to this is the question of what certainty the Chancellor can provide for pensions savers on the tax treatment of pensions that will encourage trustees or individuals to invest in the way she wants? DB and DC members shouldn’t be persuaded to risk investing in UK productive finance, only for a future chancellor to change the rules on the tax-free lump sum or lifetime allowance, thereby eating into any gains they may make. The recent changes to bring pensions into the inheritance tax net are a great example of this. 

“My real concern following the Budget is that the Chancellor has left no wriggle room if her plans don’t pay the dividends on the tax revenue she is seeking for economic growth. Following the recent budget, the OBR growth forecasts for the UK over the next 5 years aren’t great, and she has already promised no further National Insurance or tax rises for the remainder of this parliament. This potentially leaves pensions in the firing line in future if she needs more cash.”