Life & Pensions newsletter - August 2024

Our insights reveal that pensions funding and deficit remains the most prominent issue in terms of mentions between June and July, with 528 stories, followed by ESG and Net Zero (source: Brandwatch). In July, we witnessed the newly elected Labour government pushing ahead with a number of pension announcements namely, the surprising Pensions Scheme Bill in the Kings Speech, as well as the much-awaited Pensions Review.

The King's Speech outlined the new government's legislative agenda for the current parliamentary session, including a surprising new Pension Schemes Bill intended to focus on value and outcomes for members. This includes measures to prevent people from losing track of their pension pots through the consolidation of defined contribution individual deferred small pension pots, enabling an individual’s deferred small pots to be brought together in one place.

The bill will also ensure members are saving into pension schemes delivering value through the Value for Money framework. It will require pension schemes to offer retirement products and place duties on trustees of occupational pension schemes to offer a range of retirement income solutions to their members, as well as amend the Special Rules for End of Life by extending the definition of 'terminal illness.'

Still, several UK pension experts warned of a potential "retirement crisis" unless the government raises minimum contributions to workplace schemes, which the recent Pensions Bill omitted. These experts have stressed the need to increase contributions with the aim of ensuring adequate retirement income. Additionally, the Value for Money framework will clearly compel pension schemes to stay competitive, driving out those that underperform, as pension schemes will be assessed based on their performance, cost, and benefits provided to savers. Although such measures ensure that member contributions are invested efficiently, it is safe to say that the performance of larger pension schemes is favoured by the new government, prioritising better outcomes for savers overall.  

Last month's key area of discussion focused on increased investments in UK assets, which further solidifies the Labour government's pledge to improve outcomes in the UK’s capital markets. The government announced a Pensions Review, described as a ‘landmark’ by the government, has said that the first phase is focusing on investment. The next phase of the review starting later this year will consider further steps to improve pension outcomes and increase investment in UK markets, including assessing retirement adequacy. 

According to the FT, the Chancellor intends on pooling the £360bn assets of the Local Government Pension Scheme (LGPS) to enhance investment in UK assets, with legislative action a possibility if voluntary pooling proves insufficient, showcasing the new government's strong commitment to the Pensions Review.

Interestingly, the quote from Emma Reynolds suggests that further measure will be added to the Pensions Schemes Bill – “Over the next few months the review will focus on identifying any further actions to drive investment that could be taken forward in the Pension Schemes Bill before then exploring long-term challenges to ensure our pensions system is fit for the future.”

Additionally, Labour has also emphasised a greater partnership between public and private sector investments, particularly through the National Wealth Fund's flagship proposal to invest in green infrastructure. As commented by Morten Nilsson, CEO of Brightwell, “UK pensions funds are natural investors in the UK economy and there’s strong appetite for sustainable investments…. the key to success will be in the design and delivery.” To ensure its success, it’s important that the government continue to work closely with the industry.

As expected, the pensions review garnered varied reactions from the industry, with many supporting it but urging against additional bureaucracy. Those in favour of the review are hopeful that it will lead to meaningful improvements and not a way for the government access to pension assets. Some critics fear it could be a delay tactic or ineffective based on past experiences. Overall, the review is seen as an opportunity for beneficial changes, emphasising the need for fresh perspectives.

Total mentions by topic (June-July)

• Pensions funding and deficit saw the greatest number of mentions between June and July with 528 stories, followed by ESG and Net Zero with 140 stories.

Examples of Pensions funding and deficit mentions this month

• ​Mark Kleinman Sky - Exclusive: Chancellor Rachel Reeves will hold talks with Canadian pension funds in Toronto in early August as she seeks to persuade a group of investors which have ploughed billions of pounds into the UK economy to back her 'big bang' pension reforms
• Josephine Cumbo - My last act as a pensions journalist last week was to prepare a story on this remarkable analysis which shows some pensions funds are paying as much as 14 times more for the same fund, raising big questions about those securing deals on behalf of members
• Josephine Cumbo - L&G, one of the UK's biggest pension providers, has launched a new private markets strategy that includes allocations to unlisted equities. The Fund - available to L&G's 5million existing pension customers - has with the ability to allocate up to 40% into UK assets