LONDON (Reuters) -Some British pension schemes will be told to merge to become ‘megafunds’ with at least 25 billion pounds ($34 billion) of assets by 2030, the government said on Thursday, part of its wider drive to channel more investment into the UK economy.
Planned reforms will require certain smaller pension schemes to merge, in a bid to emulate Australia and Canada’s pension systems that feature fewer, larger funds that are better able to invest at scale.
“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,” finance minister Rachel Reeves said in a statement.
The UK government has been pursuing a range of policies to try to boost domestic investment, including signing up 17 investment firms to a pledge to pump 50 billion pounds of additional cash into UK businesses and infrastructure.
The latest changes, to be laid out in a forthcoming pensions scheme bill, will apply to multi-employer defined contribution schemes and local government pension schemes, the government added.
Penalties will be applied to pension funds that don’t meet the 25 billion pounds assets threshold by 2030, such as losing access to auto-enrollment contributions that would be diverted into larger schemes, a government official told Reuters.
Schemes worth over 10 billion pounds that are unable to reach the minimum size by that time will be allowed to continue, as long as they demonstrate a clear plan to reach it by 2035, the government added.
Local government pension schemes will also be given local investment targets, which the government said would help put 27.5 billion pounds into local projects. These schemes will also be told to combine assets split across more than 86 authorities into just six pools.
($1 = 0.7426 pounds)
(Reporting by Iain WithersEditing by Mark Potter)
