Reform UK has started to engage directly with pensions industry leaders about its investment and retirement policy agenda, in a move seen as part of the party’s broader strategy to position itself as a government in waiting.
Speaking at Corporate Adviser Summit, Tess Page, UK wealth strategy leader at Mercer, confirmed that Reform UK had approached the consultancy for talks on potential pensions investment reforms.
Page said the company had not found themselves in this position before, with regards to that particular party, and said this reflected the party’s growing political influence.
However she said profoundly disagreed with comments they had made to date on pensions policy in the UK, particularly in relation to the Local Government Pension Schemes. At a recent press conference Reform UK’s deputy leader Richard Tice claimed council pension schemes were underperforming and paying over the odds on investment fees, delivering poor value for taxpayers.
Page said: “The reality is that local government pensions schemes have never been better funded or better run than they are today. And there’s a huge amount of work that’s already going on with pooling. I think this kind of commentary which gets big headlines is really dangerous because it’s not informed by analysis.”
She added that Reform UK had not delivered any concrete pensions policy so it was hard to comment on their plans “but they are taking up a lot of airtime”.
The comments came as part of a wide-ranging discussion on politics and pension policy. Page warned that the populist tone of some political debate, particularly around the role of investment mangers could prove damaging. “There is a danger of portraying pensions as a sector dominated by sharks, making all this money, while people’s retirement incomes are under pressure,” she said. “That might play well with voters in the short term, but it risks undermining confidence and trust in the system.”
But Reform UK weren’t the only political party to receive criticism for the way they interacted with the pension industry. Page highlighted the short-termism of many politicians, driven by electoral cycles, and how this can hamper longer-term reforms in the pensions industry.
Looking ahead to the November Budget, she noted growing speculation about whether the Chancellor would reduce the amount that can be taken from DC schemes as tax-free cash. But she added there was also speculation about a whole raft of pension tax changes — from the removal of higher-rate tax relief, the introduction of a new Lifetime Allowance, changes to the Money Purchase Annual Allowance (MPAA), introducing national insurance on pension contributions, salary sacrifice changes, extending NI contributions to retirement income and the introduction of a wealth tax.
She acknowledged it was difficult to know what Rachel Reeves might introduce in the budget, but she said “overnight” changes to pension rules damages confidence in these savings plans.
“Confidence is the cornerstone of pensions. If you move too quickly on big-ticket areas like tax relief or tax-free cash, you risk undermining that confidence. What’s needed is consultation and a clear roadmap so people can plan ahead, rather than overnight changes.”
Page also highlighted wider risks around the new Value for Money (VFM) framework. While she supported the principle of greater transparency, she warned that league-table style comparisons between defaults could backfire if poorly handled. She said she was concerned that the performance test would remain backward looking. “The reality is that there will be performance of default strategies that no longer exist because asset allocation have changed significantly. We can spent lots of time in these VFM reports explaining why the performance is what it is – but mud sticks and these will be very public. As we have seen in Australia [which has its own league tables[ this can have an impact on public trust in pensions.”
On UK investment, Page said she supported the policy direction of encouraging pension funds to allocate more to domestic assets, but warned that barriers remained. “We need to look seriously at issues like stamp duty, which actively deters UK equity investment. If the government wants schemes to back UK growth, then state-backed entities such as the British Business Bank and National Wealth Fund also need to be much more accessible to DC schemes.”
Page added that while consolidation within the DC market was both inevitable and desirable, the transition was unlikely to be smooth. “Consolidation will deliver scale and improve outcomes, but the process will be messy. We shouldn’t underestimate the disruption that can cause in the short term.”
Her remarks highlight the increasingly complex political and regulatory backdrop for pensions, with the industry balancing calls for greater domestic investment, more scale, improved governance and simplified saver communications, all while managing the risks of politicisation.
