Chancellor Rachel Reeves congratulated the Lord Mayor of London Alastair King for progress on the ‘Employer Pension Pledge’, in her Mansion House speech last night.
More than 20 UK employers have signed the pledge to prioritise pension outcomes over cost when selecting and reviewing providers.
“I am delighted, Lord Mayor, to see businesses such as Tesco, First Group and Octopus making this commitment and like you I look forward to seeing more companies joining up,” the chancellor said.
However, Benefits Experts sister publication Corporate Adviser has reported some employers have snubbed the invitation to sign the pledge.
The Lord Mayor’s pledge is separate from the Mansion House Compact and Accord that focus on pension providers investing in private markets. It asks employers to take a more active role in improving pension value for their workers. It also supports upcoming Value for Money rules from the FCA and The Pensions Regulator.
Pension reforms
The chancellor highlighted the ongoing move to create pension ‘megafunds’, stressing that these larger funds had the power to “deliver higher returns for savers and more investment in the economy”.
She said: “The creation of defined contribution (DC) and Local Government Pension Scheme megafunds will mean larger and more powerful pots of funding invested productively across the country.
“Pension funds, and this government, are united in our determination to deliver higher returns for savers and more investment in the economy.”
She praised “funds covering the majority of the DC market” for committing to the Mansion House Accord and pledging to invest at least 10 percent of their main funds into private assets such as infrastructure and growth markets. Under the agreement at least half of this 10 percent will be invested into UK projects.
The government’s overhaul of the UK pensions system, including the Pension Schemes Bill, is expected to be signed into law in the next few months.
Jamie Jenkins, director of policy at Royal London, said: “The chancellor’s speech marks a welcome shift in the government’s rhetoric from the stick of mandating investment in UK markets to more of a carrot. The initiatives announced will help people engage with the long-term benefits of investing their savings, while contributing to growth in the economy.”
ISA reforms
Speculation that the chancellor would unveil reforms to reduce the amount people could put into tax-free ISA savings proved to be unfounded.
Reeves said: “I recognise the potential for ISA reform to improve returns for savers and access capital for UK businesses. I have confirmed that Long-Term Asset Funds can be included in stocks and shares ISAs allowing long-term ISA investors to benefit from this innovative product.”
She added that she would continue to consider further changes to ISAs and would engage widely in the coming months, as she acknowledged that views differed on the right approach.
Brian Byrnes, head of personal finance at saving and investing platform Moneybox, commented: “Cash ISAs are not, and never have been, a blocker to investing, they’re a gateway. We’re pleased to see evidence of an increased focus on consumers, and finding the right balance between cash savings and investing for long term growth, rather than cutting allowances that motivate and reward positive saving behaviours and help people become financially resilient.”
He said: “We fully support the government’s ambition to foster a stronger investment culture in the UK and while our research shows that there is an appetite to invest amongst most savers, people are held back by fear of financial loss, a lack of confidence and limited knowledge.
“Initiatives like the Advice Guidance Boundary Review, the Pensions Investment Review, easing overly cautious risk warning regulations along with consumer education campaigns will all be key to breaking down the barriers and building a nation of confident investors.”
Targeted support
Reeves also warned against presenting investment “in too negative a light” without giving proper weight to the benefits.
She said: “Our tangled system of financial advice and guidance has meant people cannot get the right support to make decisions for themselves.
“That is why we are working with the FCA to introduce a brand-new type of targeted support for consumers ahead of the new financial year.”
Karen Barrett, founder and chief executive of financial advice platform Unbiased, said: “It’s encouraging to see chancellor Rachel Reeves prioritising efforts to get more people investing in stocks and shares.
“Not only could this help savers achieve better returns than cash savings accounts, but it also has the potential to support broader economic growth across the UK.
“However, while promoting investment is a step in the right direction, a significant gap in financial education still holds many people back.
“Confidence remains a major barrier — many are unsure how to get started, how fees work, or how to navigate market volatility. And these challenges aren’t felt equally.
“Women, in particular, are less likely to invest,” she said.
Research conducted by the platform found that only 15 percent of women seeking financial advice hold traditional investments such as stocks and bonds, compared with 19 percent of men.
“One way to help close this gap, and build broader confidence in investing, is by making professional financial advice more visible and accessible.
“A qualified adviser can help individuals create a tailored investment strategy that reflects their risk appetite and supports their long-term goals.”
‘Boot on the neck’
The chancellor said that “regulation still acts as a boot on the neck of businesses choking off the enterprise and innovation that is the lifeblood of economic growth” as she acknowledges that the government needs to do more.
“Regulators in other sectors must take up the call I make this evening not to bend to the temptation of excessive caution but to boldly regulate for growth in the service of prosperity for our whole country.”
