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The new Labour chancellor Rachel Reeves has initiated a comprehensive review of the UK pension system aimed at boosting investment, increasing pension pot sizes and addressing inefficiencies within the sector.
Under plans unveiled today, billions of pounds of investment could be unlocked in the UK economy from defined contribution schemes alone, and pension pots for savers in defined contribution schemes could be boosted by over £11,000.
This reform will unfold in two stages, targeting both immediate and long-term improvements in pension management.
The first stage, spearheaded by pensions minister Emma Reynolds, will focus on promoting productive investments through scheme consolidation and the encouragement of broader investment strategies.
This phase seeks to enhance the current pension landscape by ensuring funds are allocated to areas that yield higher returns.
The second stage, scheduled for later this year, will concentrate on improving pension outcomes and fostering increased investment in UK markets.
This phase will explore ways to maximise the returns for pensioners and bolster the UK economy.
During the election campaign, Labour committed to a thorough evaluation of the UK pensions framework. Reeves and Reynolds will now convene a roundtable with key stakeholders today to spark industry engagement.
Reeves emphasised the urgency of the review, stating: “Despite a very challenging inheritance, this new government is getting on with the job of delivering our mandate to get the economy growing so we can make every part of our country better off.
“The review we are announcing is the latest in a big bang of reforms to unlock growth, boost investment and deliver savings for pensioners. There is no time to waste.”
The government projections suggest that defined contribution schemes will manage approximately £800bn in assets by the end of the decade.
The review aims to channel more of these assets into the economy – even a 1% shift could potentially result in £8bn of new investments to spur growth and infrastructure development.
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