The UK pensions minister shifts focus from pension providers to employers in delivering the growth agenda, highlighting the influence employers have on pension outcomes.
In a keynote speech delivered at the Mansion House conference ‘Connecting Capital: Workplace Pensions and UK growth’, Torsten Bell has urged employers to take greater responsibility for pension outcomes and productive investment, arguing that workplace pension scheme selection plays an important role in both retirement adequacy and UK economic growth.
The minister said that despite the move from defined benefit (DB) to defined contribution (DC) system, which shifted the investment risk from employers to employees, the choice of pension scheme “still rests with employers”, which he claims is a “new responsibility”.
He said: “Employers are sometimes treated as a sideshow in the pension system, but this hugely underestimates their influence.”
Bell added that while employers may not still invest in equities, they make the decisions that shape the pension outcomes for “millions of workers”.
He added that because employers select workplace pension schemes, that makes them the “key customers” who define those schemes.
But he argued that procurement exercises often prioritise low cost over investment performance, and the implication is that employer purchasing decisions can influence whether pension providers allocate capital towards productive investment and growth assets.
He said: “Many employers attend pension-provider presentations with only a small weighting on the returns to savers.
“That happens too much”.
Bell has repeatedly stressed that retirement outcomes should dominate employer decision-making.
He has called on employers to view pension fund selection not simply as a cost-management exercise but as a decision that affects both workers’ retirement outcomes and the ability of pension capital to support productive investment across the UK economy.
Scale
But the minister has not entirely left out providers, as he has said the most immediate task is to deliver on commitments to scale.
The government wants to consolidate the UK pension market into pension “megafunds” under the Pension Schemes Act 2026, which will require schemes to have £25bn in main scale default by 2030.
Schemes that do not hold at least £10bn by 2030, and are on the path to reach £25bn by 2035, will have to consolidate.
Bell highlighted that scale in the industry is important as it enables broader investment opportunities, adding that larger pension funds are better able to invest across a wider range of asset classes, particularly private and less liquid assets.
He also argued that scale is important because larger schemes have greater capacity to act as active owners of the assets they hold.
