What connects delivering better returns for savers in old age, affordable housing, clean energy and creating the growth that our economy needs? The answer is pensions.
As mooted during the Budget, tonight’s Mansion House speech is expected to focus on this area, looking at measures to promote more local investment into productive assets, realise pension fund consolidation to support efficiencies and look at how to unlock big pools of private capital to bolster the UK economy.
The stakes are high. Last month the Chancellor set out the challenge the economy was facing.
Rachel Reeves was clear that without private investment we wouldn’t see the significant, long-term growth we all need.
Reform: There is an increasing focus on how pension funds can be used to drive UK economic growth, while benefiting savers and retirees for the future
According to a report by the Pension and Lifetime Savings Association, £1 trillion of pension fund capital is allocated to UK-domiciled assets, deployed mainly in Government debt, fixed-income assets and publicly listed companies.
There is now increasing focus on how pension funds can be encouraged to allocate more to emerging opportunities that could drive UK economic growth, while benefiting savers and retirees for the future.
As the Government lays the groundwork for its growth agenda, pension capital should be at the heart of this.
We must recognise that the financial futures of the economy, individuals and the Government are inextricably intertwined.
I want to be able to look back in five years’ time and see tonight’s speech as a turning point that makes pensions work harder for savers, while increasing investment into productive assets and boosting economic growth. We welcome any measures that will achieve these collective aims.
Pensions are a catalyst for better outcomes. For instance, L&G has recently launched an Affordable Housing Fund, allowing us to crowd more investment into affordable housing in areas of acute need across England. Such schemes put capital to work for the real economy and local communities.
We have made a good start here. But with the right reforms we can go much further.
I hope the Chancellor sets out plans this evening to make that happen on a wider scale, helping to deliver value for money for scheme members, employers, local taxpayers and ultimately the Exchequer.
In any announcement today, it is also vitally important that the Chancellor does not lose sight of what pensions are for and the role played by pension funds.
This is to give members good returns on their savings, enabling them to live a happy and healthy retirement.
Investment drive: Last month Chancellor Rachel Reeves (pictured) made it clear that without private investment we wouldn’t see the significant, long-term growth we all need
The aims of better returns and greater investment can and must continue to work in tandem with each other, while balancing the fiduciary duty which comes with managing client money.
This means helping to educate people on what pensions can do for them and supporting pension funds to deliver growth. While cost is important, value is key.
The country, and particularly infrastructure, is in increasing need of investment – as much as £50billion in private capital alone over the next two decades, according to the National Infrastructure Commission.
Meanwhile, demand for affordable housing continues to grow and we need to evolve to a cleaner, greener world.
We simply cannot afford to stick with the status quo and low growth.
Pension reform needs to deliver tangible results on outcomes for savers, with a focus on improved adequacy.
This is vital. Better-off pensioners will become more self-sufficient, which benefits the whole economy.
At the moment, about half of working age people are not saving enough for retirement. By putting savers first, we can realise our wider collective ambitions.
Pensions and pension capital matter to all of us, no matter our age or occupation. I hope the Chancellor will seize this opportunity and help us all to deliver.
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