Sonya Fraser comments on pensions ‘megafunds’ announced in the Chancellor’s Mansion House speech
In her inaugural Mansion House speech, Chancellor Rachel Reeves last week set out plans to create ‘megafunds’ with greater ability to invest in a wider range of assets.
Commenting on what effect this will have on the commercial market, partner Sonya Fraser highlighted: “In the private sector the Government’s focus is on scale and consolidation among the larger multi-employer defined contribution schemes, and it is consulting on proposals to introduce, for master trusts and group personal pensions, minimum size requirements for default funds and to place limits on the number of default funds. The precise numbers will be set following this consultation, with a plan to apply the new requirements from 2030 at the earliest. There is a suggestion, however, of targeting a minimum size for multi-employer DC schemes of £25bn to £50bn to facilitate their consolidation into ‘megafunds’. This could well result in shrinking the commercial market to just a handful of players.”
Sonya continued that “the drive to consolidate multi-employer DC schemes should be carefully balanced against the risks of a concentrated market and of reducing competition and innovation. Member outcomes should be prioritised ahead of the Government’s objectives to increase pension scheme investment in UK assets. Care should be taken to ensure the proposals do not result in disorderly market exits to the detriment of members.
Commenting on the second of the Chancellor’s proposals impacting multi-employer DC schemes, Sonya noted that “The proposal to legislate to remove the need for individual member consent to transfer out of a contract-based arrangement would helpfully remove a barrier that currently exists to move members out of such arrangements where appropriate to do so – and would bring trust-based and contract-based schemes onto more of a ‘level playing field’. This will enable appropriate action to be taken in relation to low performing schemes in conjunction with the upcoming new Value for Money framework.”
Read Sonya’s comments in Pensions Expert, here, and Professional Pensions, here.
The views in this article are intended for general information purposes only and should not be used as a substitute for professional advice. Arc Pensions Law and the author(s) are not responsible for any direct or indirect result arising from any reliance placed on content, including any loss, and exclude liability to the full extent. Always seek appropriate legal advice from a suitably qualified lawyer before taking, or avoiding taking, any action. If you have any questions on the points raised in the above, please do not hesitate to get in touch.