Rachel Reeves to create pension ‘mega funds’ to invest in infrastructure

Published

12 months ago

November 13, 2024

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Pension “mega funds” will be created under government plans to increase infrastructure investment.

Reforms could “unlock £80bn” of investment, according to Treasury plans, which say bigger funds can get greater returns.

Chancellor Rachel Reeves wants to imitate the way large Canadian and Australian pension schemes work.

She will give more details about her plans in a speech at Mansion House on Thursday evening.

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Almost 90 local government pension pots will be grouped together, with defined contribution schemes merged and assets pooled together.

This is part of the government’s plan to increase economic growth through investing in infrastructure.

Pension schemes get greater returns when they reach around £20bn to £50bn as they are “better placed to invest in a wider range of assets”, according to the government.

This is backed up by evidence from Canada and Australia, the government argues – with Canada’s schemes investing four times more in infrastructure, and Australia three times more compared to the UK’s defined contribution schemes.

Ms Reeves said it marks “the biggest set of reforms to the pensions market in decades”.

The chancellor added the changes would “unlock tens of billions of pounds of investment in business and infrastructure, boost people’s savings in retirement and drive economic growth so we can make every part of Britain better off”.

However, Tom Selby, the director of public policy at financial company AJ Bell, said: “There needs to be some caution in this push to use other people’s money to drive economic growth. It needs to be made very clear to members what is happening with their money.”

The government says the funds will be regulated by the Financial Conduct Authority and will need to “meet rigorous standards to ensure they deliver for savers”.

Local government pensions v defined contributions

The Local Government Pension Scheme in England and Wales will manage assets worth around £500bn by 2030. These assets are currently split across 86 different administering authorities, with local government officials and councillors managing each fund.

Under the government plans, the management of local government pensions and what they invest in will be moved from councillors and local officials to “professional fund managers”.

This will allow them to invest more in assets such as infrastructure, supporting economic growth and local investment on behalf of the 6.7 million public servants, the government said.

Defined contribution pension schemes are set to manage £800bn worth of assets by the end of the decade.

There are around 60 different multi-employer schemes, each investing savers’ money into one or more funds. The government will consult on setting a minimum size requirement for these funds.

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Businesses cautious – but pensions sector backs plans

Businesses will need to be reassured that the government’s plans are watertight following the fallout from the budget, according to the trade group the Confederation of British Industry (CBI).

The CBI’s chief economist Louise Hellem said: “While the chancellor is right to concentrate on mobilising investment, putting pension reform to work for the government’s growth mission, unlocking investment also needs competitive and profitable businesses.

“With the budget piling additional costs on firms and squeezing their headroom to invest, the government needs to work hard to regain the confidence in the UK as a place businesses and communities can succeed.

“Pension schemes will want to operate within a UK economy that is prospering.”

But key parts of the pensions sector gave their backing to the government’s plans, including Standard Life, Royal London, Local Pensions Partnership Investments and the Pensions and Lifetime Savings Association.

Deputy Prime Minister Angela Rayner said: “This is about harnessing the untapped potential of the pensions belonging to millions of people, and using it as a force for good in boosting our economy.”

Politics

David Lammy blames ‘human error’ for release of migrant sex offender – as confirms independent investigation

Published

4 hours ago

October 28, 2025

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David Lammy blames 'human error' for release of migrant sex offender - as confirms independent investigation

David Lammy has confirmed there will be an independent investigation into the accidental release of a migrant jailed for sex offences, as he blamed “human error” for the incident.

The deputy prime minister and justice secretary told MPs he was “livid” on behalf of Hadush Kebatu’s victims and he would be deported back to Ethiopia “as quickly as possible”.

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Kebatu, who was found guilty in September of sexually assaulting a 14-year-old girl and a woman in Epping, was freed in error from HMP Chelmsford in Essex on Friday instead of being handed over to immigration officials for deportation.

His accidental release sparked widespread alarm and a manhunt that resulted in him being found and arrested by the Metropolitan Police in the Finsbury Park area of London at around 8.30am on Sunday.

The incident has sparked questions over how the man, whose crimes sparked protests in Epping over the use of asylum hotels, was able to be freed.

Addressing MPs in the House of Commons, Mr Lammy said the mistake should not have happened as he sought to lay part of the blame on to the Conservatives over the state of the prison system over the past 14 years.

He said “there must and there will be accountability” for the mistaken release of Kebatu from prison.

“I’ve been clear from the outset that a mistake of this nature is unacceptable,” he said.

“We must get to the bottom of what happened and take immediate action to try and prevent similar releases in error to protect the public from harm.”

Mr Lammy said he ordered an “urgent review” into the checks that take place when an offender is released from prison, and new safeguards have been added that amount to the “strongest release checks that have ever been in place”.

The justice secretary said the investigation would be led by former Metropolitan Police deputy commissioner Dame Lynne Owens, who also used to lead the National Crime Agency.

He also said the investigation would have the same status as high-profile probes into other prison incidents, including the attack on three prison officers at HMP Franklin in April of this year and the escape of Daniel Khalife from HMP Wandsworth in 2023.

‘Calamity Lammy’

Shadow justice secretary Robert Jenrick referred to a report by Sky News which detailed how a witness present at the prison observed Kebatu appearing “confused” upon his release.

The witness said Kebatu had in fact tried to go back into the prison several times, but was instead guided to Chelmsford station, where he caught a train to London.

Mr Jenrick claimed the case was proof “the only illegal migrants this government are stopping are those that actually want to leave the UK”.

“Dear oh dear,” he said. “Where to begin? This justice secretary could not deport the only small boat migrant who wanted – no – who tried to be deported.

“Having been mistakenly released, Hadush Kebatu came back to prison asking to be deported not once, not twice, but five times, but he was turned away.”

He went on: “The only illegal migrants this government are stopping are those that actually want to leave the UK.

“His officials, briefing the press, called it the mother of all – yeah, they’re not wrong, are they?”

Mr Jenrick, who served as immigration minister under the previous Conservative government, branded his opposite number “calamity Lammy”.

“It’s a national embarrassment and today the justice secretary feigns anger at what happened.”

Continuing with his attack, Mr Jenrick asked Mr Lammy whether he would resign if Kebatu was not deported “by the end of the week” – to which he received no reply.

But asked later by an MP whether he was considering his position, Mr Lammy replied: “A ridiculous question, the answer is no.”

The new checks announced by Mr Lammy on Monday involve five pages of instructions and require more senior prison staff to sign off a release, according to documents obtained by Sky News.

The instructions are effective from Monday.