Call for evidence published on pensions investment review

The government published a call for evidence in September 2024 as part of its pensions investment review, asking for views on consolidation, value for money, and investment in the UK¹. The review was launched in August 2024 and is led by the Minister for Pensions, Emma Reynolds¹. It is seeking to boost investment, increase saver returns and tackle waste in the pensions system¹.

The review covers how pension schemes invest. Schemes hold bonds issued by corporations and governments, equities, property, infrastructure and other alternative investments¹. The Pensions Policy Institute estimated that pension schemes invest 6% of their assets in a narrow definition of UK productive assets, covering only private equity and alternative investments; on a broader definition including publicly listed equities, corporate bonds, private equity and alternative investments, the share was 18%¹. The briefing notes it is not straightforward to work out how UK defined contribution (DC) schemes allocate between asset types, partly because of inconsistent and overlapping definitions, and that the pattern varies significantly by type of scheme¹.

The government set out its aim for the review in its own words:

Responses to the call for evidence have come from industry bodies. The Pensions and Lifetime Savings Association says the measures are important but are not a "silver bullet" for driving investment into UK productive finance, and would need to be part of a "much broader strategy" including suitable investment opportunities, fiscal incentives and policy certainty¹. The Association of British Insurers identifies a risk that policy on value, scale and consolidation could unintentionally conflict with the government's policy of increasing investment in UK assets; it notes that if recent underperformance of UK equities continued, it could reflect poorly in the value metrics of those invested in them, and that scale and consolidation would not necessarily increase weighting towards the UK, since bigger schemes can access a wider pool of assets globally¹. For organisations representing pension trustees, a core principle is that trustees should continue to be free to make decisions in line with their fiduciary duties to act in the best interests of scheme beneficiaries¹.

Proposals for a value for money framework are intended to encourage a greater focus on investment returns and service standards, in addition to costs and charges¹. The interim report also set out proposals for the Local Government Pension Scheme (LGPS) on pooling assets and strengthening governance for consultation¹. The LGPS is a defined benefit scheme providing a guaranteed income in retirement based on salary and length of service¹. DC schemes do not provide a guaranteed pension; they provide a pot of money to use in retirement, and its value can increase or decrease depending on factors including investment returns and contributions made¹.

Why it matters for households

The review concerns the schemes people save into for retirement, so its outcomes stand to affect both the charges and the investment returns that shape a DC pot, and the governance of the LGPS, which pays a guaranteed income based on salary and length of service¹. The call for evidence itself changes nothing for savers: it is a request for views, and no decisions on consolidation, value for money metrics or UK investment allocations have been taken in it¹. The briefing records disagreement about effects. The Pensions and Lifetime Savings Association says the measures are not a "silver bullet" and need a broader strategy¹, while the Association of British Insurers warns that value, scale and consolidation policy could conflict with the aim of increasing investment in UK assets¹. Trustee bodies say decisions should remain with trustees acting in beneficiaries' best interests¹. The briefing does not report any change to the State Pension, to Pension Credit or to benefit rules arising from the review.

What happens next

An interim report was published on 14 November 2024¹. Following it, the government sought further views on proposals to increase scale and consolidation and on how pension fund investments could support UK economic growth¹. Full recommendations will be published in 2025¹. Separate work is also ongoing on how defined benefit schemes might invest more in the UK economy¹.