Pension Scheme Bill Commentary

On 29 April the Pension Schemes Bill received Royal Assent and became law. It brings to a close a policy initiative which started in late 2024 with Chancellor Reeves’ first Mansion House speech.

According to the Government, this is a landmark bill, which will help more than 20 million people better save for their retirement and will boost UK growth. It aims to achieve that by reducing costs and boosting returns. It will also make it easier to consolidate smaller individual pension pots and allow the creation of multi-employer defined-contribution ‘megafunds’. Importantly, after much back and forth with the House of Lords, the Government agreed to tone down its original plans. These would have given it the power to mandate UK pension schemes to invest in private markets, half of this investment being in the UK.

It is good to see these proposed powers watered down. While we can see why the Government might want to steer pension investment to what it might consider to be “good causes”, it really should be for the schemes themselves to decide what is best for their members.

The Bill also put the finishing touches to the consolidation of the Local Government Pension Scheme into a few pools, which the government hopes will lead to economies of scale and generally better outcomes. This consolidation is nearly complete now, with pools already doing most of what they are expected to do. But as local authorities move from trusted and established arrangements involving appointed fund managers and independent advisors to new arrangements centred around powerful pools, they need to remain extra vigilant. Governance issues may emerge as the relationships between stakeholders change.