3 thoughts on the Pensions Investment Review from an ex-DWP adviser
Jan Zeber, Bradshaw Advisory’s Head of Policy and former expert adviser on pensions policy to three successive DWP Secretaries, gives his take on the outcomes of the Pensions Investment Review
The UK Government has just released its much-anticipated Pensions Investment Review, a regulatory blueprint aiming to reshape how pension capital is deployed to boost investment and economic growth. Having sifted through the details, three key issues stand out - each carrying implications that go beyond initial headlines.
1. Mandation: reading between the lines
On the surface, the Government's proposal to mandate pension schemes to invest in line with Mansion House commitments if they do not do so on a voluntary basis sounds straightforward and forceful. Yet the devil, as always, is in the detail. The wording around mandation is riddled with caveats and qualifiers, undermining its apparent strength.
The official line suggests that the Government will conduct a “thorough assessment” before intervening, with powers explicitly framed as “reserve” measures intended to “protect savers’ interests.” Moreover, any intervention must be "consistent with the principle of fiduciary duty," a notable and potentially ambiguous qualifier.
These carefully chosen phrases hint at significant behind-the-scenes negotiation - perhaps even some last-minute scrambling to align differing views. Indeed, the subtlety of language like "principle" of fiduciary duty rather than the duty itself indicates a tentative and perhaps legally fragile foundation for action.
Given these substantial caveats, it seems unlikely mandation would be implemented robustly. Rather, the fine print suggests that mandation, despite bold headlines, might remain a rhetorical device rather than a practical policy lever. My bet is this intervention remains theoretical.
2. Consolidation: go big or go home
The Review also tackles consolidation, recognising the economic potential of large-scale pension funds to channel investment more effectively into productive economic activity. In principle, the logic here is undeniable - larger funds can better diversify risk, invest more strategically, and ultimately secure higher returns.
However, the Review's openness to exceptions and prolonged 'transition pathways' risks undermining the very essence of consolidation. If smaller pension schemes have the option to justify remaining independent, their advisers will inevitably dedicate substantial resources to crafting arguments against merging. The practical effect is clear: delay, resistance, and ultimately missed opportunities.
This issue demands clarity and decisiveness: either the UK government genuinely believes in the transformative economic potential of pension consolidation, or it doesn't. Permitting half-measures and loopholes will only reinforce the status quo, leaving the UK—still the world's second-largest pensions market - without even a single top-tier global pension fund among the world’s top 30.
The time for exceptions and equivocation is past; policymakers need the courage to push meaningful consolidation through, or risk permanent mediocrity in the global pensions landscape.
3. Recognition of the real problem: investment environment
A particularly encouraging aspect of the Review is its recognition of the broader economic environment as critical to unlocking productive investment (Chapter 5). Rather than simply focusing on regulation within the pensions industry, the Government acknowledges a crucial truth: the real bottleneck is the supply of high-quality investment opportunities, not a shortage of available capital.
This broader perspective underscores a vital point: pension reforms alone, while important, are insufficient to drive substantial economic growth. Effective planning reform and targeted deregulation are arguably far more impactful, as they directly increase the availability and attractiveness of domestic investment opportunities.
Therefore, prioritising improvements to the investment climate - streamlining planning processes, cutting unnecessary red tape, and fostering regulatory stability - should rank higher on policymakers' agendas. Addressing these fundamental barriers will ultimately enable pension funds and other investors to deploy capital efficiently, driving the productive economic growth the country urgently needs.
It's worth highlighting the Government’s implicit endorsement of recommendations from the Inclusive Growth Commission - particularly the explicit domestic mandate proposed for the Office for Investment. Such strategic alignment signals a positive step towards coherent, growth-oriented policy-making.
Overall, while the Pensions Investment Review moves the debate forward, crucial gaps and ambiguities remain. If policymakers truly aim to transform the UK's economic future, they must match ambitious rhetoric with decisive action - especially on consolidation and broader investment environment reforms. Otherwise, we risk another missed opportunity, leaving pension savers and the wider economy worse off.