Chancellor Rachel Reeves is raising concerns about potential risks tied to new pension reforms aimed at boosting investments in the UK economy
London: So, Rachel Reeves, the Chancellor, is gearing up to announce some big changes to pension rules. She’s looking to let corporate pension schemes invest a hefty chunk of their surplus funds—around £60 billion to £100 billion—back into the UK economy.
These defined benefit schemes, often called final salary schemes, are like the gold standard of pensions. They promise a fixed income when you retire, no matter how much you’ve saved up. But here’s the catch: younger workers usually don’t get these kinds of pensions anymore.
Traditionally, these schemes have played it safe, sticking to low-risk investments like government bonds. But back in July, Jeremy Hunt, who was the Chancellor before Rachel, hinted at a shift. He wanted these pension funds to start investing in newer UK companies and startups.
Now, Rachel is expected to push this agenda further in her upcoming speech. She plans to include these changes in a pension schemes bill soon. But there’s a bit of a worry among pension experts. They want to make sure that any push to invest in riskier assets doesn’t mess with their duty to the employees and pensioners.
Ian Mills, a partner at a pensions consultancy, thinks it’s great that reforms are on the table. But he’s also cautious. He pointed out that many of these pension schemes are being taken over by insurance companies. If they start dumping their safer investments, like government bonds, it could raise borrowing costs for the government.
He believes that while the reforms could be beneficial, they need to be careful not to go overboard. If they do, it might lead to a sell-off in the bond market, which could have some serious implications for the government’s finances.
