UK Pension Funds: British Asset Backing Confirmed
- Shadow Chancellor Rachel Reeves confirmed plans to establish a "backstop" power,compelling large pension funds to increase their investment in British assets.
- This contentious step toward mandating investment strategies will be included in upcoming pensions legislation.Aviva chief Dame Amanda Blanc likened the approach to using excessive force, while Conservatives have...
- The Treasury anticipates that creating pension "megafunds," each holding over £25 billion in assets, combined wiht a voluntary agreement with the industry to increase allocations to private assets,...
Rachel Reeves is set too mandate that large pension funds significantly increase their UK investment. This bold move aims to inject over £50 billion into British assets, targeting infrastructure, housing, and high-growth businesses, which could boost UK investment and pension fund performance. The proposed “backstop” power, detailed in the upcoming pensions legislation, will allow the government to dictate investment strategies, sparking immediate debate. While some see it as necessary to reverse the decline in British assets, others, including Aviva’s chief, view it as overreach. News Directory 3 is following how the Treasury anticipates this move, coupled with a voluntary industry agreement, will reshape investment allocations. Discover what’s next as the Pension Schemes Bill unfolds.
Reeves Plans “Backstop” to Force Pension Funds to Back British Assets
Updated May 29,2025
Shadow Chancellor Rachel Reeves confirmed plans to establish a “backstop” power,compelling large pension funds to increase their investment in British assets. The move aims to unlock over £50 billion for domestic infrastructure, housing projects, and rapidly expanding businesses, potentially boosting UK investment and pension fund returns.
This contentious step toward mandating investment strategies will be included in upcoming pensions legislation.Aviva chief Dame Amanda Blanc likened the approach to using excessive force, while Conservatives have condemned the plan as government overreach into private savings.
The Treasury anticipates that creating pension “megafunds,” each holding over £25 billion in assets, combined wiht a voluntary agreement with the industry to increase allocations to private assets, will reverse the long-term decline in British assets investment. The government plans to retain a reserve power within the Pension Schemes Bill to establish binding asset allocation targets, potentially including specific targets for UK assets.
Reeves’ allies suggest the power may not be necessary, anticipating that reforms in the new pensions legislation and a “Mansion House accord” with the industry will achieve the desired outcomes.
we’re making pensions work for Britain.These reforms mean better returns for workers and billions more invested in clean energy and high-growth businesses.
The reforms center on requiring multi-employer defined contribution pension schemes and local government pension scheme pools to operate at a “megafund level,” similar to models in Australia and Canada. The Treasury estimates that these megafunds, managing at least £25 billion each, will drive over £50 billion of investment into major UK infrastructure and other British assets, leading to higher returns for savers.
Following industry feedback, schemes exceeding £10 billion that cannot meet the minimum size requirement by 2030 will be permitted to continue operating, provided thay demonstrate a clear plan to reach £25 billion by 2035.
The UK currently has approximately 60 multi-employer DC pension schemes, with combined assets projected to reach £800 billion within five years. Under the Mansion House accord, 17 of the UK’s largest pension providers have pledged to invest at least 5% of their default funds in private British assets by the end of the decade.
The Treasury anticipates that the Mansion House pact will unlock £25 billion for UK investment by 2030, with a similar amount expected from local investment targets set by local government pension schemes.
Reeves aims to reverse a significant decline in domestic investment from UK pension funds, which the Treasury reports has fallen from over 50% of DC assets in 2012 to approximately 20% in 2023.
What’s next
The upcoming Pension Schemes Bill will outline the specifics of the “backstop” power and the requirements for pension funds. The industry will closely monitor the legislation’s progress and it’s potential impact on investment strategies.