The pensions industry has broadly welcomed the financial services sector reforms made in the Chancellor’s Mansion House speech yesterday, 16 July; however, concerns remain around implementation and trustee autonomy.

The Leeds Reforms announced by Chancellor, Rachel Reeves, in her Mansion House speech yesterday, 15 July, which seek to cut regulatory red tape to attract investment and boost growth in the UK were “warmly welcomed” by several industry experts.

The Leeds Reforms intend to make the UK a more attractive destination for financial services businesses, and include the Financial Services Growth and Competitiveness Strategy.

As part of this, the government will look at investment, deregulation and consumer duty.

In terms of investment, Gallagher principal and senior actuary, Sarah Brown, noted that the UK’s network of pensions schemes – many of which are now in a “comfortable” surplus – has emerged as an “unsung success story” for the cohort of workers who had access to such a scheme.

Brown said it makes sense that the government would be keen to leverage the considerable investment power that has accumulated in those schemes and use it to fund its wider economic policies.

Legal & General group CEO, António Simões, argued that driving long-term economic growth and prosperity requires action today, calling this package "another step in the right direction".

“Connecting investment capital to the most compelling opportunities, streamlining regulation whilst maintaining standards and protection, and support for consumers to save in ways that will better benefit them in the future is the kind of intervention we need," he said.

Simões said the UK must “keep up the pace and ambition” to turn these plans into “tangible” action that makes a difference on the ground and in people’s pockets.

Reeves also highlighted the ongoing work being done to deliver the pension reforms announced at her previous Mansion House speech, including the creation of defined contribution (DC) and Local Government Pension Scheme (LGPS) megafunds and the Mansion House Accord.

Brown noted that if successful, a UK pensions megafund, composed of both DC schemes and LGPS pools, could amount to at least £25bn in assets by 2030, but warned that a mandate for schemes to invest in UK assets may “alienate” trustees.

“Only 30 per cent of public sector defined benefit (DB) schemes are invested in the UK, and that figure is even lower for DC schemes – around 20 per cent are invested in the UK compared to 50 per cent in 2014,” she said.

“However, trustees must allow for the membership’s best interests, and some trustees may not be willing to funnel assets into a UK-based investment to appease the Chancellor.

“Retirement security is a pressing concern for millions of people, and members will need reassurance that trustees are considering every investment option, regardless of geographical location.”

Echoing this, Royal London policy director, Jamie Jenkins, claimed that the Mansion House speech marked 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,” he said.

In addition to this, St. James's Place chief executive officer, Mark FitzPatrick, expressed “strong support” for the planned UK Investment Campaign, which joined colleagues across the industry to develop a campaign that encourages the nation to invest.

He explained that building a culture of investing is “vital” – not just for people’s long-term financial wellbeing, but for the wider economy.

“With better awareness, we can help more people feel confident about investing and nurture a stronger investment culture,” FitzPatrick added.

In her speech, Reeves also highlighted the role of the Employer Pension Pledge, which was launched by the Lord Mayor of London, Alastair King, earlier this week (14 July).

The voluntary pledge saw over 20 of the UK's largest employers commit to maximise employee pension value by prioritising retirement outcomes for their workforce, rather than focusing on cost reduction, when selecting or reviewing pension providers.

Independent Governance Group head of policy and external affairs, Lou Davey, welcomed the voluntary pledge and said: “Employers play a major role in delivering value for money to pension savers and have the agency to really shift the focus from cost alone to overall value, helping to ensure employees get the best out of their retirement savings. It is reassuring to see this important role being highlighted."

Later on in her Mansion House speech, Reeves announced a rethink of several post-financial crisis rules, including reviewing the powers of the Financial Ombudsman Service.

FitzPatrick expressed that he is “pleased” to see progress being made to make the regulatory system more predictable, such as the plans to return the Financial Ombudsman Service to its original purpose as a “simple, impartial” dispute resolution service.

The Chancellor also announced plans to allow long-term asset funds (LTAFs) to be held in stocks and shares individual savings accounts (ISAs) next year.

Fidelity International head of platform policy, James Carter, said that despite welcoming the government’s decision, there are further regulatory and operational considerations to work through.

In particular, he highlighted platform dealing capabilities and ensuring adequate consumer protection and education as main focus areas.

Echoing this sentiment, Eversheds Sutherland financial services principal associate, Katie Taylor, said allowing LTAFs to be ISA eligible is a “genuinely novel step” and a “bold reimagining” of what the ISA wrapper can currently hold.

She said that this creates a challenge for the government, platforms and firms offering LTAFs to “rethink everything” from tax rules to infrastructure so they can accommodate assets that don’t trade or price daily.

Taylor called this “exciting” and suggested that it opens the door to true access to long-term investments like infrastructure and private markets.

However, she said this also demanded care as “government enthusiasm must be matched by safeguards, education, and new systems that respect the illiquid, complex nature of these funds”.

“Getting that balance right will define whether this is a successful breakthrough or not,” she warned.

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