IPE UK Briefing: Government’s growth ambition for the UK

Last month’s Pensions and Lifetime Savings Association’s (PLSA) investment conference in Edinburgh was all about the government’s growth ambition for the UK.

Pensions minister Torsten Bell opened the conference acknowledging the number of regulatory changes looming over the UK pensions industry and promised a “clear roadmap” of how these changes will fit together.

He updated the audience on the progress of recent consultations including surplus extraction and part 1 of the pensions review, saying both responses would be published this spring. Bell has also reiterated the government’s focus on scale, saying that large schemes are better placed to invest in more productive assets.

But Joanne Gibson, head of the pensions investment review at His Majesty’s Treasury, reassured that while scale is at the forefront of the UK’s ambition it will be achieved with “minimal disruption”.

However, with the government currently exploring ways for next steps on how to increase productive assets investment, considering anything from increasing the minimum voluntary requirements to making investment compulsory, master trusts have raised concerns that this could create a “bubble” in terms of asset prices, reducing the value to the individual in terms of their return.

This could also affect where pension funds invest, meaning that schemes might not be able to pick the best opportunities for their members. Therefore, commentators suggested that increasing productive finance should be done on a voluntary basis instead.

LGPS

Last month the local government pension schemes (LGPS) have pushed back on the government’s consolidation plans, with a number stating they would instead opt to get regulatory approval from the Financial Conduct Authority (FCA) to set up investment companies.

Acknowledging the push back, the pensions minister said that while the changes may not be “comfortable” for the pools, they will happen. Bell is now due to meet with individual investment pools to discuss plans regarding LGPS consolidation.

Longevity swaps

Earlier this year, WTW predicted that longevity transactions would reach £20bn (€24bn) in 2025, with two pension funds already completing four transactions between them this month.

The BT Pension Scheme (BTPS), one of the UK’s largest private sector pension schemes with 260,000 members and £36bn in assets, completed two longevity reinsurance transactions. The new longevity arrangements cover BTPS pensioner liabilities of £5bn with Swiss Re and increase the existing cover with Reinsurance Group of America (RGA) by £5bn.

The Lloyds Banking Group pension fund trustees have, meanwhile, entered into two new longevity insurance and reinsurance arrangements to protect a further £5.1bn of liabilities with Rothesay Life, Pacific Life Re and a US-based insurance subsidiary of Prudential Financial. The new arrangements cover £2.1bn and £3bn of pensioner liabilities in the Lloyds Bank Pension Scheme No.2 and the HBOS Final Salary Pension Scheme, respectively.

Items to note:

• The Impact Investor Forum 2025 is being held at the The Conduit in London on Thursday 15 May 2025, 14:00 - 18:00

Pamela Kokoszka

UK Correspondent