The UK’s chancellor, Rachel Reeves, presented the government’s Budget to the House of Commons last week, outlining the government’s plans for the economy, announcing a £26bn (€29.5bn) tax rise leading to a surplus of £22bn by 2029/30. Her presentation prompted a ‘subdued’ reaction from bond markets.
The unexpected early publication of key documents from the Office for Budget Responsibility (OBR) summarising the government’s plans before the chancellor had a chance to address parliament also caused clapback.
As a result, 10-year Gilt yields briefly fell from 4.50% to 4.42%. By the time the statement concluded, yields had settled at around 4.47%.
As part of the Budget, Reeves announced that the government will transfer the Investment Reserve Fund in the British Coal Staff Superannuation Scheme to the pension fund’s trustees. This will be paid out as an additional pension to members of the scheme, the government confirmed.
During her Budget speech, Reeves said she had decided to meet trustee demands after pressure from Labour members of parliament in Bassetlaw, Mansfield, Barnsley South, Blyth and Ashington and Merthyr.
The government is also looking to allow defined benefit (DB) surplus to be paid directly to members.
While the plans were not announced during last week’s Budget speech, accompanying documents concluded that the government is also building on reforms to unlock some of the £160bn (€183bn) of DB pension fund surplus by reducing the tax charge on surplus funds paid directly to members.
The documents claimed that this will make it easier for members to benefit and for trustees and employers to agree on surplus extraction, boosting investment across the economy, enabling well-funded DB pension schemes to pay surplus funds directly to members over the normal minimum pension age.
LGPS consolidation
Last month also saw six new funds officially sign up to Local Pensions Partnership Investments (LPPI) after being told to find a new home by pensions minister Torsten Bell, who rejected proposals put forward by ACCESS and Brunel Pension Partnership to meet new minimum standards set out for local government pension pooling.
Devon, Avon, Dorset, Somerset, Cornwall and the Environment Agency pension funds all declared LPPI as their preferred pooling partner back in September and have now officially signed a memorandum of understanding, bringing LPPI’s total assets under management to more than £54bn.
The formal integration process is expected to be completed by the government’s deadline of 31 March 2026.
In the defined contribution (DC) space, Smart Pension acquired WS Stakeholder Pension Scheme from Waystone Management, bringing in £580m in total assets.
The acquisition of the stakeholder scheme by a DC master trust is the first of a new wave of potential consolidations and paves the way for further similar contract-to-trust consolidations, Smart Pension said.
Under the UK government’s consolidation plans, most DC pension funds will have to have a “main scale default arrangement” of at least £25bn in AUM by 2030.
The acquisition brings Smart Pension’s total AUM to over £8.5bn, making it the eighth-largest DC master trust in the UK.
The People’s Pension
The People’s Pension, meanwhile, has been busy overhauling its investment strategy.
Last week, it reshaped the £6bn pre-retirement component of its default fund, shifting away from cash and sovereign debt as part of a broader redesign driven by falling interest rates, market volatility and member-behaviour data.
It has also added Robeco to its emerging markets equity manager roster, which was previously overlooked solely by State Street Investment Management.
The People’s Pension had already appointed Amundi and Invesco to look after passive market equities and fixed income investments, respectively. Now it has appointed Robeco to manage a £3.6bn emerging market equity portfolio.
This move, it claimed, represents an investment change from a passive approach to an active quantitative strategy for The People’s Pension’s emerging markets portfolio, and achieves greater alignment with the pension fund’s evolving responsible investment policy.
Pamela Kokoszka
UK Correspondent
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