Rachel Reeves’ new megafund pension announcement could shortchange women, a finance expert has warned. The chancellor’s plans to combine smaller funds into a group of giant megafunds in the Pension Schemes Bill are predicted to benefit millions of workers by £6,000 by 2030.
Labour also hopes that by pooling at least £25 billion in assets within the next five years into a series of megafunds, creating fewer, larger entities, it will release more private capital to support infrastructure projects and startups. However, Antonia Medlicott, managing director of Investing Insiders, advised that only a specific demographic will see the benefit.
She said: “The £6,000 figure being thrown around needs to be taken with a pinch of salt, as it is based on a particular set of circumstances that will not apply to most savers.
“One crucial factor is that it is based on a man, meaning women stand to gain less on the whole, as they are more likely to take career breaks and miss out on pension contributions.’’
Women are more likely to work part-time during caregiving years and in many systems, this results in fewer pension contributions, particularly in cases where part-time work doesn’t count toward pension savings.
Ms Medlicott isn’t entirely against Rachel Reeves’ plan, pointing to its success in other countries. She explained that larger pension funds are able to invest at scale, which has proven to generate better returns for savers.
She said: “For example, Australia’s superfunds have returned an average of 8.8% over the past decade, compared to the UK’s average of 7.6%, recent calculations have found.
“That gap may not sound huge, but over time, that difference could amount to tens of thousands of pounds.”
Reeves is planning to merge the 86 local government pension plans in England and Wales into six giant funds, projected to have assets of £500 billion by 2030, and consolidate £800 billion of assets held by about 60 multi-employer defined-contribution plans.
The Chancellor said: “We’re making pensions work for Britain. These reforms mean better returns for workers and billions more invested in clean energy and high-growth businesses – the plan for change in action.”
Sir Steve Webb, a former Liberal Democrat pensions minister, said: “The Government has clearly been bold in this area and this opens up the potential for this surplus money to be used more productively to benefit scheme members, firms and the wider economy.”
