Chancellor Rachel Reeves will tomorrow meet leading figures from the world of finance to discuss how pension funds worth £800 billion can be used to turbo-charge the economy.
She has dubbed the measures a “big bang”, in an echo of the phrase used to describe Tory Prime Minister Margaret Thatcher’s reforms to financial markets in the 1980s.
The Government wants defined-contribution pension funds to invest more in “productive assets”, which can include infrastructure, industry and property.
It claims this could give the average retiree an extra £11,000 in their pension pots while helping the UK achieve the highest rate of economic growth in the G7.
Ms Reeves said: “The review we are announcing is the latest in a big bang of reforms to unlock growth, boost investment and deliver savings for pensioners.
“There is no time to waste. That is why I am determined to fix the foundations of our economy so we can rebuild Britain and improve people’s lives.”
Other elements of the economic plan include changing the planning system to prevent councils and residents blocking building and changes to UK stock exchanges.
The Chancellor and Pensions Minister Emma Reynolds will hold a roundtable with pensions industry leaders tomorrow, while Ms Reeves is also to chair the first meeting of a new “Growth Mission Board” on Tuesday.
It has emerged that Ms Reeves hopes to secure a free trade deal with the US if Donald Trump regains the Presidency in November’s elections. In a previously unpublished interview before the general election, she said a US trade deal “would have to be in Britain’s national interest”.
Mr Trump spoke about signing a “very substantial” trade deal with the UK when he was last in the White House but talks ended after he lost the 2020 Presidential vote.
Defined contribution schemes will be managing around £800 billion in assets by the end of the decade and the Government says shifting just one percent could provide £8 billion of new investment to build infrastructure.
The proposals have won the backing of industry leaders. Legal & General Group Chief Executive António Simões said: “As the UK’s largest manager of money for pension clients, we welcome the ambition set out by the government.
“Driving pensions capital into areas such as science, technology and infrastructure can help support better returns for millions of retirement savers, as well as stimulate much needed long-term growth for the economy.”
Barclays Chief Executive CS Venkatakrishnan said: “We welcome the Government’s timely review of the pensions sector. Pensions reforms are critical to unlocking institutional investment in growth equity, and alongside a streamlining of listing requirements, will give a significant boost to UK capital markets and growth. Building institutional demand is also an important signal in encouraging private share ownership.”
The “Big Bang” of 1986, overseen by Tory Chancellor Nigel Lawson, involved a dramatic reduction in regulation in the financial markets and increased use of technology. It was credicted with cementing London’s place as a global financial capital.