Mansion House speech announces pensions “megafunds”

On November 14, 2024, the Chancellor announced the Government’s intention to boost investment by driving the development of pension “megafunds”. This was accompanied by the interim report of the Government’s Pensions Investment Review and related research and analysis from the DWP. Two consultations have been launched on measures to achieve this.

The first consultation targets multi-employer DC scheme providers. The Government intends to introduce a minimum size requirement applying either to each default arrangement that a provider offers or to each default fund in which the provider invests. The Government similarly wants to cap the number of each provider’s default arrangements or, alternatively, of its default funds. 

These measures would drive consolidation in the DC market, resulting in fewer, larger funds intended to be better placed to invest in productive assets.

A further proposal would enable bulk transfers of contract-based pension arrangements without member consent. This would, broadly, bring contract-based pensions into line with trust-based pensions and facilitate consolidation.

Finally, this consultation also explores the role of pricing in the market and seeks views on how employers and advisers might be encouraged to focus on value rather than cost.

The second consultation proposes changes to the Local Government Pension Scheme and aims to achieve greater pooling of its various funds.

The closing date for these consultations is January 16, 2025. The intention is for changes to be included in the forthcoming Pension Schemes Bill.