Pension Investment Review seeks scale – but not at any cost

Joanne Gibson, head of the Pensions Investment Review at HM Treasury, was speaking at the Pensions and Lifetime Savings Association’s (PLSA) Investment Conference in Edinburgh earlier this week.

“We’re trying to put pension providers in the best place so they can take advantage of the opportunities across asset classes – and that includes productive finance,” she said.

This is why scale has been so central to the reforms, Gibson explained, as it provides pension schemes with efficiencies and negotiating power.

She added: “We don’t see that helping and supporting pension savers is in any way incompatible with helping domestic UK growth, because getting better returns in turn can help wages, jobs and prosperity for those pension savers. We see it as a win-win, as long as it’s done properly.”

The government has decided it wants fewer, larger pension schemes – which the chancellor, Rachel Reeves, has dubbed “megafunds”. Its objective is to achieve this in as safe a way as possible, without disrupting the market, Gibson explained.

She was unable to shed any light on the direction of the second phase of the Pension Review, which is expected to focus on adequacy, but acknowledged that something would have to be done about contribution rates.

Consensus may indicate support for higher contribution rates, said Gibson, but for some – in particular lower earners – that may not be the right answer.

“We’re all here to get the best for pensioners, to get the long-term value that we want from our pensions,” she said. “The government wants to do this through having scale, but in a practical way of getting there.”

Gibson added the final report would be published “in good old civil service speak, in the spring”.

Speaking earlier in the conference, pensions minister Torsten Bell said the final report would be published before parliament’s summer recess in July.

Focus on outcomes needed

Ewan McCulloch, chief stakeholder officer at the local authority pension pool Border to Coast Pension Partnership, said the review presented an opportunity to “build a strong, resilient and affordable system”.

“Defined benefit schemes – sadly – are fairly rare,” said McCulloch. “If this is a mechanism where we can add greater value and make it affordable to be open for the long term, then that’s a good outcome.”

But the focus should be on outcomes, rather than how things are currently done, he added.

Lizzy Holliday, director of public affairs and policy at Now Pensions, agreed there should be a focus on the outcomes.

“It’s a really interesting moment in pensions evolution and really significant,” she said.

“We also want to engage on how we get there, but the objective of supporting members is absolutely key.”