Pension Talks Interview: Mike Ambery, Retirement Savings Director, Standard Life

The end of May and beginning of June saw major reforms in the world of pensions, with the government making a series of announcements on defined contribution schemes, local government schemes and defined benefit pension schemes. Subsequently, the long-awaited Pensions Scheme Bill finally arrived at the end of last week. The Bill hailed “a game changer “and intended to “transform the £2 trillion pensions landscape to ensure savers get good returns for each pound they save and drive investment into the economy”. 

On defined benefit schemes, the government set out proposals to relax rules around surplus extraction, allowing well-funded DB schemes to return surplus funds to sponsoring employers or enhance member benefits. Given current pension funding levels, these funds are substantial, with estimates of £160 billion of surplus assets currently held in UK DB schemes. 

For defined contribution master trust schemes and local government pension scheme pools, the government has set out proposals in its final ‘Pension Investment Review’, which contains new requirements for these schemes to operate at a “megafund level” with at least £25 billion assets under management, similar to those in Australia and Canada. The rationale for this, is that larger funds are better placed to take a more active role in investing in the U.K. economy and fund infrastructure. This will, of course, require consolation to take place in the market. 

Perhaps the most controversial aspect of these reforms is the prospect of the government potentially forcing pension schemes to invest in UK assets. The government has announced that it will legislate a reserve power to set quantitative baseline targets for pension schemes to invest in certain assets for the benefit of the UK economy. There are concerns within the pension industry that this will not be compatible with pension funds’ fiduciary duties to secure good outcomes for members.

A government roadmap was published alongside the Bill to provides information about the timetable for implementing the changes, with the Bill expected to receive Royal Assent in 2026. Then consultation draft regulations to introduce many of the measures are expected to follow, with the aim of all changes being in force by the end of 2030. 

Mike Ambery stated that this is "a once in a generation focus for the pension and savings industry on value and future direction across DB and DC." This marks a pivotal moment in modernising the UK's retirement system and improving retirement outcomes for consumers.