Impact of the 2024 Mansion House Speech on pensions

Chancellor of the Exchequer Rachel Reeves delivered her first Mansion House speech on Thursday 14 November – with the announcements having significant implications for pension schemes and the wider industry, our experts give their considered reactions.

The Chancellor’s approach falls short of driving UK growth

Matt Tickle, Partner and Chief Investment Officer

“The Chancellor has pulled her punches when it comes to radical change to promote UK growth. Getting a few tens of billions of pounds from LGPS pools into UK infrastructure – which is still questionable unless the domestic investment element is mandated – won’t actually move the dial on UK growth prospects. 

“The magnifying glass needs to shift from the sources of investment to the destination. The UK planning and regulatory system continues to make infrastructure projects inefficient and unappealing to institutional investors; investing in reform of capital programmes and cutting red tape and uncertainty to business would improve investment prospects more effectively than just targeting pension assets.

"GDP has expanded by a measly 0.1% in the three months to September. While the Government can only do so much so fast, if it truly wishes to deliver the highest sustained growth in the G7 then it will need to take a far punchier and radical approach." 

LGPS reforms deliver more enforcement but lack transformative change

Melanie Durrant, Partner and Public Sector Consulting Actuary

"Local Government Pension Schemes (LGPS) were holding their collective breaths for 'the biggest reform in decades' at the Mansion House speech, especially given the build-up from the early communications and Labour's vocal ambitions for UK growth.

“Given that crescendo, the end result has been a bit underwhelming. In reality, the proposals are more of the same, but with a greater degree of enforcement of pooling. There is no merger of funds, and no mandate to invest a percent of those assets into the UK's domestic markets. 

"The 'fit for the future' consultation does add more bite to the Government's proposals, and as a result the winners would appear to be the ‘built pools’ who are in line to get more assets to manage and greater decision-making powers. This is all the more reason to ensure pool governance is effective."

Missed opportunities for unlocking corporate DB pension capital

Ian Mills, Partner and Head of DB Endgame Strategy

"This Mansion House speech was an enormous missed opportunity. If Rachel Reeves wants capital investment into the UK then the corporate DB pension sector is the obvious place to focus on. But all we got on this was silence.

"There are literally hundreds of billions of pounds sat in these pension schemes doing very little and without reform this will simply be passed to the insurance sector. Instead, she could have enabled it to be directly reinvested in British businesses by enabling scheme sponsors to access a fair share of it.

"Pensioners could have benefitted too, by allowing their share of it to be used to uplift pensions. Instead, it appears this will simply find its way to insurance company shareholders.

"The impact on the gilt market will, in the long run, be profound. UK DB schemes have supported Government finances by buying vast quantities of gilts over the last 20 years or so. Without reform, these gilts will simply be dumped over the next decade or so, pushing up the interest cost for the taxpayer."

Sustainable finance ambition requires stronger policies and collaboration

Clare Keeffe, Associate and Senior Sustainable Investment Consultant

“The Chancellor has reiterated the Government's desire to be a leader in sustainable finance, a consistent ambition since 2019. To make this happen, the consultation on transition plans is a really important step, especially given Labour’s earlier proposals to include pension schemes in mandatory sustainability reporting. Pensions have such a critical role in long-term investment, so it makes sense for them to be part of the conversation around climate accountability.

"The Chancellor’s Mansion House speech highlighted how crucial it is to get private finance involved in funding the climate transition, and the National Wealth Fund’s £70 billion potential is a good start. But when you consider research showing the UK needs £900 billion for energy supply by 2050, it’s clear there’s a big gap to fill. Getting there will mean a real team effort from government, private finance, and major investors like pension schemes, backed by strong policies to guide the way.”

For in-depth analysis of the Mansion House speech and implications for the pensions industry, register for our live Q&A webinar: Dissecting the Mansion House Speech taking place on Thursday 21 November from 3.15pm.