Rachel Reeves’ plans for council pensions ‘megafunds’ risks stagnation, an expert says. (Image: Getty)
‘ plan to create risks triggering stagnation, a leading investor has warned.
The Chancellor wants to consolidate 86 Local Government Pension Schemes (LGPS) and around 60 defined contribution pension schemes to make them big enough to unlock tens of billions of pounds worth of investment in business and infrastructure projects.
Tony Dalwood, Chief Executive of asset manager Gresham House, warned uncertainty about how the Government will bring in the plan means many pension funds are putting crucial investment decisions on hold.
He told the inertia risks affecting investment in important British industries, including green energy and infrastructure for up to two years.
Mr Dalwood warned there will be a period where the implementation will lead to stagnation, adding: “People won’t take decisions and, when they do, there’s a question over whether they will have the resources to execute them.”
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The Chancellor wants to to unlock tens of billions of pounds worth of investment. (Image: Getty)
The senior investor said the plan would in fact run counter to the Chancellor’s aim to boost UK economic growth as merged funds would invest more abroad.
Gresham itself invests in 19 town council pension schemes and could lose out from the “megafund” plan as fewer funds would result in fewer fund managers.
A Government spokesperson denied uncertainty over its merger plans for council pension funds would risk investment stagnation in Britain.
They said: “Our ‘Fit for the Future’ consultation will provide long-term clarity by putting the LGPS on a clear and firm trajectory to scale consolidation, alongside measures to improve governance of the scheme and boost local investment.
“We will respond to the consultation in due course and, along with the introduction of the Pensions Bill this summer, we will provide further certainty to the sector.”
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The Government denies its pension ‘megafunds’ plan risks stagnation. (Image: Getty)
The plans for pensions “megafunds” have drawn comparisons with schemes in Canada and Australia where infrastructure investment volumes are four and three times greater than those managed by UK Defined Contribution schemes respectively, according to .
Some experts have warned that if the number of schemes in Britain is cut too low, innovation could suffer, leading to reduced competition and poorer outcomes for pensioners.
The Society of Pension Professionals has warned the Government is advancing with its plans too quickly.
Mr Dalwood likened the uncertainty some pension scheme investors felt to the unease among corporate bosses in the run-up to the Chancellor’s maiden Budget.
Ms Reeves’s first financial statement to the Commons led some companies to pause activity and slowed UK economic growth.