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Pension mega funds: "a high risk, low return investment opportunity"

ended 14. November 2024

The Chancellor is apparently considering merging the UK's 86 council pension schemes into a small number of "pension megafunds". Newspage asked IFAs and financial services experts for their views, which can be found below. One said: "The UK has a dreadful record at delivering large infrastructure projects on time and on budget. It strikes me as a high risk, low return investment opportunity." Another added: "Rachel "Regulate" Reeves is continuing the work of the Conservatives and is now looking at council pension funds to reignite the economy and prop up a disastrous Budget for UK businesses. Mega funds can be controlled more easily, which may be the real reason behind the desire to consolidate."

 

6 responses from the Newspage community

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Daniel Wiltshire
Actuary & IFA at Wiltshire Wealth
The Chancellor sees this a potential cheap source of funding for her pet projects, but it's not clear that this will benefit public sector workers. The UK has a dreadful record at delivering large infrastructure projects on time and on budget. It strikes me as a high risk, low return investment opportunity.
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David Nicklin
SSAS Consultant at Retirement Capital
Centralising council pension schemes may sound like efficiency, but it's closer to a government cash grab dressed up as reform. Merging funds might streamline administration, but it risks turning local pensions into piggy banks for politically motivated projects, where risk and return may not align with pensioners' best interests. The UK’s track record with large infrastructure projects is less than stellar, often resulting in delays and budget overruns. We’re talking about pensions here, not just numbers on a spreadsheet but the financial futures of millions of public sector workers. Pensions are in the Government crosshairs right now but they should not be used to prop up budget deficits.
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Hamish Anderson
Co-founder and Chief Executive Officer at Money Mover
Pooling assets makes sense in terms of management and cost efficiencies, as anyone who’s tried to manage pensions from numerous previous employers will agree. It’s also a step towards creating a sovereign wealth fund that has provided so well for the people of Norway but has been notably lacking from the UK’s financial resources. What it isn’t is a viable alternative to a coherent government plan to invest in the renewal and creation of the country's infrastructure.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Rachel "Regulate" Reeves is continuing the work of the Conservatives and is now looking at council pension funds to reignite the economy and prop up a disastrous Budget for UK businesses. Mega funds can be controlled more easily, which may be the real reason behind the desire to consolidate.
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Simon Bridgland
Director at Charwin Private Clients
The idea of pooling the pension pots is good in principle, as is handing over control to fund managers who would perhaps take more of a commercially calculated risk than the current local government officials. I would have concern, however, if the remit of investment selection for the fund managers limited it severely to UK government infrastructure, which is well documented for massive over spending and delays, further compounded with political party changes which would then follow on to tinker with pension structure yet again. Can the government afford to have defined benefits schemes exposed to similar risks and cost of defined contribution schemes. Who will pay to further top up funds when things go south?
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
If only there was some proverbial guidance on putting all your eggs in one basket. No doubt the proposed changes would ease administrative costs, but could also increase risks.