UK Pension Reform Expected – What It Means For UK Workers

UK Chancellor Rachel Reeves is currently on a 3-day trip to North America, where she’s expected to meet with a group of Canadian Retirement Funds in Toronto to discuss how the Canadian pension system could inspire change in the UK.

Speaking to press, the Chancellor confirmed: “The size of Canadian pension schemes means they can invest far more in productive assets like vital infrastructure than ours do. I want British schemes to learn lessons from the Canadian model and fire up the UK economy, which would deliver better returns for savers and unlock billions of pounds of investment.”

“We’re already beginning to see schemes announce plans to invest. That’s a vote of confidence in our work to fix the foundations of the economy, rebuild Britain and make every part of our country better off.”

What Features Of The Canadian Pension Model Could Britain Adopt?

Rachel Reeves has confirmed that she is considering consolidating local government pension schemes into one larger pot – just as the Canadian government do. It’s estimated that £360 billion of local government pension schemes are split out across 86 local governments with around 6 million members.

By consolidating those funds into one larger pot controlled by the government on a national level, those funds, according to the Chancellor, are better able to be used to invest in infrastructure across the UK, rather than just in local areas. Essentially, this could mean stronger investment in every corner of the UK.

What Does This Mean For UK Businesses?

Business owners across the UK may wonder how a new pension model could impact them. If Ms Reeves is right in her predictions and stronger investment in infrastructure across the UK is the result of such a change to the pension model in the UK, then this can only be a good thing for local businesses, who may see investment in their area and higher footfall, investment opportunities, and improved profits as a result.

Investment drives investment, so a boost to a UK business owner’s local area could boost their bottomline. But this relies on the Chancellor first committing to changing the current pension scheme model, passing it through parliament, and then using that fund for infrastructure investment – all of which remains to be seen.

What Does This Mean For Employees?

UK employees with pensions in local government pension schemes needn’t worry at the moment. Any changes to pension schemes of this nature could be a long way off, and even if they pass through parliament it’s standard practice in the pension industry to offer alternative pension options to those in schemes that are changing.

Pension holders may prefer to switch to a different scheme if the current pension model changes – and you will almost certainly be given this opportunity should the proposed changes take place.

Are Any More Pension Changes Expected?

The Chancellor had previously announced her intention to review the pension sector in the King’s Speech on Wednesday 17th July, where an Employment Law Bill was also proposed. As it stands, the pension sector review is still ongoing, so more changes may be expected in the future.

If more changes are announced and those changes are expected to impact UK businesses and employees, then you can get all of your SME news here at Real Business.

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