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On 10 July 2023, Chancellor of the Exchequer, Jeremy Hunt gave his first Mansion House speech. He used the speech to announce a wide range of pensions reforms and initiatives. The big themes were consolidation and investment in UK business. Every part of the pensions industry was covered, including the public and the private sector as well as all varieties of pension scheme: Defined Contribution, Defined Benefit and Collective Defined Contribution.

Many of the reforms have been heavily trailed already, but the speech and the various policy documents that have been published in its wake give a lot more detail on the Government’s plans. The industry will have to spend the next few months picking over the details.

Defined Contribution (‘DC’) schemes

The Chancellor announced that nine of the UK’s largest DC pension providers, including private pension providers and Master Trusts, have agreed to the objective of allocating 5% of assets in their default funds to unlisted equities by 2030 – the so-called ‘Mansion House Compact’.  If all DC schemes follow suit, the Chancellor estimated that up to £50bn would be invested in “high growth” companies by 2030 via this route.

The reforms also include a new ‘Value for Money’ (VfM) framework for DC schemes – a set of requirements consulted on by Government and regulators earlier in the year. The framework will require schemes to publish a whole host of new metrics covering investment performance, charges and customer service. Poorly performing schemes will be encouraged and, ultimately, forced to transfer into larger, better performing schemes.

The Chancellor also confirmed that the Government will continue to encourage the development of Collective DC schemes.

Not mentioned in the speech, but there are also consultations on dealing with the proliferation of small DC pots and helping savers understand their options at retirement.

George Fowler, Partner at Isio commented:  “The commitments made by major Master Trusts to invest in illiquids are positive but 5% in unlisted equities by 2030 is not particularly ambitious. Some schemes are already investing that amount. 
The VfM consultation will be key to effecting change towards private markets in a meaningful way. Many schemes will have default options which are very low cost which means if the outcome of the VfM consultation does not shift the focus to outcomes and value rather than cost cutting, capital will end up stuck in less innovative default schemes instead.
It is interesting that a roadmap for collective DC will be set out to give schemes the opportunity to assess its feasibility for their members. However, it won’t be a solution for all. Increasingly, more portability within pensions and a range of investment vehicles is important to members.”

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Defined Benefit (‘DB’) schemes

The Chancellor announced a new regulatory regime for “superfunds”, the nascent brand of consolidation vehicle that operates as a half-way house between the DB regime and the insurance sector. Currently, superfunds are regulated under the usual DB regime, with extensive additional guidance from TPR. The proposals would put the superfund regime on a firmer regulatory footing.

There is also a call for evidence on how DB schemes and the Pension Protection Fund can contribute to productive finance.

Finally, there will be a drive to improve trustee skills and capabilities, with a call for evidence on this subject, too.

Ed Wilson, Partner at Isio commented: “It is positive that the Chancellor’s golden rules confirm that for many of the mature DB schemes, they are right to invest in gilts and other lower risk investments. Member security is the key as the rules codify. It’s pleasing to see, compared to the early soundings, that the Chancellor agrees that it is the right approach not to interfere with individual DB schemes investment strategies.
Further to this, we welcome that the Government is looking to make consolidation easier for smaller schemes, more concrete plans on how this could be achieved are needed. As we already see through the existing routes to consolidation in the market (operational consolidators, DB master trusts and ultimately insurer buy-outs), this delivers greater certainty to scheme members sooner and more efficiently.”

Get in touch with Ed at

Local Government

The Chancellor’s proposals include reforms to the Local Government Pension Scheme (‘LGPS’).  He announced a consultation on proposals aimed at increasing LGPS investment in private equity to 10%, with the potential to increase investment in the class to £25bn by 2030.

The consultation will also consider accelerating the consolidation of LGPS assets into pooled funds, with all funds to be transferred by March 2025.

Steve Simkins, Isio’s Public Sector Pensions Lead concluded: “With the increased pressure to form £50bn investment pools, LGPS is in danger of being treated more like a sovereign wealth fund than a pension fund. However, moving to a one size fits approach is in conflict with the different needs across the employer base, especially with the LGPS being so well funded.
The LGPS is currently fully funded on a gilts basis, a position which would cause trust based schemes to rush for the insurance door. Suggestions of doubling LGPS allocations in private equity are contrary to what many funds and their employers might be considering over the coming years.

Get in touch with Steve at

Overall thoughts

The Chancellor’s speech has set the tone for Government policy on pensions, with much of the detail to be settled through consultation and calls for evidence.  Most of the announcements were on areas where work was ongoing, so there wasn’t much here that was brand new. 

It is good to see the Government being keen to take on board industry feedback before finalising any changes and we hope the speech also paves the way for clarity on some of the other initiatives that have gone quiet lately, such as the new DB funding regime and the Pension Regulator’s General (Single) Code on administration and governance.

Ed Wilson, summarised: “While there are many positives to be welcomed from the Chancellor’s speech, an opportunity has been missed to truly define the future of pensions and set out a more transformational vision.
It was encouraging to see such a focus on growth and value but there was no reference to how pension schemes incorporate ESG or how further incentives for employees to save could be created, and how employers help them to do so. Financial education sits at the heart of this – the Chancellor should make wider employee financial education exempt from tax in the way that pensions advice currently is. He should also raise the limit.
For the legacy DB schemes, more could also be done to drive the growth in consolidation and the consultation will be helpful to accelerating this. This has to be the way forward for smaller schemes, to facilitate innovation and better outcomes, albeit with a competitive market solution, rather than nationalisation.”

Get in touch with Ed at

What next?

The industry will be digesting the speech and reading through all of the various consultations and calls for evidence in order to figure out what they might mean for UK pensions. The Chancellor wants all the details to be worked through before his Autumn Statement so there’s plenty to do over the summer.

Mansion House Update – consultations

Isio’s inaugural LGPS (England and Wales) Low-Risk Funding Index

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