LONDON: Millions of British workers could retire with larger pension pots under government plans to double the number of U.K. pension “megafunds” by 2030, unlocking billions for domestic investment.
Reforms set out in the upcoming Pension Schemes Bill will require multi-employer defined contribution (DC) pension schemes and Local Government Pension Scheme (LGPS) pools to manage at least £25 billion in assets by the end of the decade. The move aims to increase investment in infrastructure, housing and fast-growing businesses while improving returns for savers.
Chancellor Rachel Reeves said the changes would ensure “better returns for workers and billions more invested in clean energy and high-growth businesses.”
Key Benefits of the Reforms
– £50+ billion for UK investment – Pension funds have pledged to allocate 5% of assets to domestic projects, reversing a decline in U.K. investment.
– Higher retirement savings – An average earner could see a £6,000 boost to their pension pot through consolidation alone, with further gains expected from improved fund performance.
– £1 billion in annual savings – Economies of scale and better governance could cut costs, benefiting both savers and the economy.
The reforms follow international examples, such as Australia and Canada, where large pension funds have successfully invested in major infrastructure and private businesses.
The £392 billion LGPS will consolidate its 86 administering authorities into six larger pools, freeing up capital for regional projects. For the first time, local investment targets will be set, directing £27.5 billion toward community priorities.
Deputy Prime Minister Angela Rayner called the LGPS an “untapped potential” that could “drive growth and opportunities across the country.”
More than 50 scale-up businesses endorsed the reforms in a letter to the chancellor, praising the move as a “significant milestone” in backing British firms.
Irene Graham, CEO of the ScaleUp Institute, said the changes would help address the U.K.’s “longstanding growth capital gap.”
The Pension Schemes Bill will also introduce measures to streamline small pension pots, improve fund performance and ensure better retirement income options.
The government has set a March 2026 deadline for LGPS pooling, with safeguards to protect members’ interests. Funds unable to reach the £25 billion threshold by 2030 will have until 2035 to comply if they present a viable plan.
Three major funds—London CIV, Aegon UK and NatWest Cushon—have already committed to investing in fast-growing businesses through the British Growth Partnership, managing a combined £274 billion in assets.
The reforms come as the government reports strong economic growth, new trade deals and falling interest rates, signaling what ministers call the “Plan for Change in action.”