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Mansion House speech signals pensions reform but omits phase 2 review: industry reaction

by Muna Abdi
July 16, 2025
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The Mansion House speech last night failed to mention Phase 2 of the Pensions Review, which industry experts say was a missed opportunity to tackle long-term sustainability.

The speech reaffirmed the government’s focus on transforming pensions and signalled future consultations and potential reforms, especially around DC schemes, ISAs, and a UK pensions megafund, but did not announce specific policy changes.

A post-summer consultation on ISAs is expected, raising questions about tax efficiency and flexibility compared to pensions. Speculation also grows that the Autumn Budget could see the return of the Lifetime Allowance and changes to salary sacrifice.

The push for a UK pensions megafund was reinforced, but suggestions to increase pension investment in UK assets have raised concerns about trustee independence and fiduciary duty.

Experts broadly support pension improvements but stress reforms must protect members and avoid unintended tax impacts.

PMI chief strategy officer Helen Forrest Hall says: “Retirement adequacy cannot be solved in isolation. We must break down product silos and build a lifetime savings framework that reflects how people actually live—balancing pensions, ISAs, housing and emergency savings.”

Hymans Robertson head of DC corporate consulting Hannah English says: “While last night’s speech was unsurprising and simple, the importance of pensions to the economy should not be underestimated. There was a clear reemphasis of the government’s determination to transform pensions and so the industry faces a period of unprecedented change. The speech had references to the changes awaiting the LGPS and DC pensions markets and reiterated the commitment to the dual aims of better pensions for individuals, and pensions as a force for good for the economy also; ideas we fully support.

“One notable area where change looks to be coming is around ISAs. We expect with a consultation likely to appear after the summer recess. Putting money into an ISA (along with saving into a pension) is one of the first steps many will take into the world of investing and future proofing; it will be interesting to see what comes next here. ISAs can provide savers with the more flexible savings than pensions, particularly for savers who require quick access to their funds. If the regulations and or limits on tax efficiency change, this could impact savers’ views on the benefits of saving into an ISA versus a pension.

“Speculation continues to gather pace that the Chancellor will raise taxes and announce spending cuts in the Autumn, with pensions a potential target. Two areas that continue to be rumoured are salary sacrifice and the lifetime allowance. Salary sacrifice is an extremely popular and efficient mechanism embraced by both employers and employees and change in this area would be seen as a mistake by many.

“The lifetime allowance (LTA) was removed in 2024, and we know the members of the government are keen to bring this back as a means of funding the government’s fiscal black hole. If this was to be reintroduced, this could affect the limits on which savers can save into pensions. Current speculation could risk savers making potential knee jerk decisions to avoid a possible reintroduction of the LTA, which could have long lasting consequences. It is important that as an industry we do not encourage such decisions in the absence of certainty on possible changes. The proof will be in the Budget, but it is clear from the speech last night that pensions will be a key area of focus for the Chancellor and play a central role in her Autumn Budget.”

Gallagher principal and senior actuary Sarah Brown says: “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. 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. If successful, a UK pensions megafund, composed from both DC schemes and Local Government Pension scheme pools, could amount to at least £25bn in assets by 2030.

“However, a mandate for schemes to invest in UK assets may alienate trustees. Only 30% of public sector DB schemes are invested in the UK, and that figure is even lower for DC schemes – around 20% are invested in the UK compared to 50% in 2014. 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.”

Royal London director of policy Jamie Jenkins says: “The Chancellor’s speech marks 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.” 

Berenberg Asset Management head of asset management Sales Phoebe Nyugen says: “The Lord Mayor’s call to move beyond fee-based decision making and to deploy pension capital into alternatives is a welcome shift. Long-term member outcomes depend not just on selecting the right managers, but also on using the right tools. That includes resilient alternative strategies and public market approaches that help manage downside risk while preserving potential growth opportunities.”

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