The government has today published the final report from its Pensions Investment Review, setting out plans to make all defined contribution (DC) master trusts into “megafunds” with at least £25bn in assets under management.
Similar “megafunds” plans have been confirmed for the Local Government Pension Scheme (LGPS), with the six surviving pools also expected to meet government requirements relating to pooling of assets and the provision of strategic investment advice.
All LGPS pools meet the £25bn “megafunds” target, according to data from PensionsPerformance.com.
“These reforms will mean bigger, better pension schemes, delivering a better retirement for millions and high investment in Britain.”
Torsten Bell, pensions minister
In a press release announcing the report, the government claimed its consolidation plans alone could add £6,000 to individuals’ retirement pots.
Chancellor Rachel Reeves said the Pension Investment Review’s outcomes were about “making pensions work for Britain”.
“These reforms mean better returns for workers and billions more invested in clean energy and high-growth businesses – the Plan for Change in action,” she said.
Pensions minister Torsten Bell added: “Our economic strategy is about delivering real change, not tinkering around the edges.
“When it comes to pensions, size matters, so our plans will double the number of £25bn-plus megafunds. These reforms will mean bigger, better pension schemes, delivering a better retirement for millions and high investment in Britain.”
The 31 March 2026 deadline for asset pooling remains, with a “backstop” power set to introduced in the Pension Schemes Bill later this year.
The report also sets out local investment targets for the LGPS, seeking to plough £27.5bn of pension money into local opportunities.
Elsewhere, the London CIV – the LGPS pool for London’s local borough pension schemes – has announced plans to invest in the British Business Bank’s new investment vehicle for pension funds.
Alongside the review’s final report, the government has also today published its response to the ‘Options for defined benefit schemes’ consultation, setting out planned rules for surplus release.
Pensions Expert will be covering all these elements of the report in depth throughout today.
The Pension Schemes Bill will include a “reserve power” that will enable it to set “quantitative baseline targets for pension schemes to invest in a broader range of private assets, including in the UK, for the benefit of savers and for the economy”.
Giving the government the power to force particular asset allocations could undermine trust in the pensions system and introduce downside risks for pension schemes, the trade body has said.
The government will give itself the power to decide what pooling organisation a local authority pension fund should join as a “backstop” to ensure its “megafunds” plan for the Local Government Pension Scheme (LGPS) succeeds.
As part of the government’s “megafunds” plans, it has set out a “transition pathway” to help DC providers reach its target of at least £25bn in default arrangements by 2030. Any new default funds will require regulatory approval.
The London CIV has announced that it will work with the British Business Bank on the launch of the British Growth Partnership with a view to becoming the first local authority pool to back the initiative.
