Is this the best that the insurance lobby can do?

Posted on March 15, 2026 by henry tapper

 

The insurance lobby have teamed up with Pensions UK and the right wing press to derail the pension schemes bill. They have landed on a Clause 40 which gives any Government the opportunity to demand money is invested for the good of the country.

There is so much to do to get adequate pensions for millions of savers not in public sector pensions and not in funded DB schemes like LGPS, RailPen and USS.

Can we please stop making so much fuss about mandation? Relative to what Royal London and Hymans recently referred to as the State Pension gap (the £12,000 pa  people are on average short of) – mandation of investment is a sideshow.

I have to admit that when Rachel Reeves came up with mandation well before the election, I thought there would be trouble here from trouble-makers. I thought right.

Here is what articles in the Times have as their headlines.

Pensions UK gave the lobby trying to wreck the pensions schemes bill nearly an hour to spout this line and I am so sorry that I had to sit through Helen Whatley’s scripted rant.

The Times opens up its most recent rant with an attack on this Government as having it in for workers saving for their retirement.

Plans to force millions of pension savers to invest in high-risk investments will put retirements at risk, the government has been told….

and it goes on

But the pensions industry has warned that having your life savings invested in political vanity projects could cost lower-paid savers dearly while those with gold-plated public sector pensions will not be affected.

I am not the “pensions industry”, even if I work for better pensions every day of the week.

It is wrong , as I told Helen Whately , to see the ABI and Pensions UK lobby position as the position of the pensions industry. What we as a whole want is adequacy for everyone.  To suppose that what is going on is a Government trying to hi-jack pensions to get it out of trouble is fantasy. It’s been dreamt up by lobbyists who’d like to derail the use of DB surplus for the country (rather than the shareholders of insurers), It is picking at the detail of CDC which is a  way to improve on workplace pensions.

As with DB which the ABI see as a deferred bulk annuity, so DC is to them a kind of deferred annuity using “flex and fix” into retail annuities .

Who is behind all this nonsense?

The trade bodies Pensions UK and ABI have called for Clause 40 to be cut from the legislation entirely. Their  spokesperson is Yvonne Braun. Here is her argument

Braun said that while the Association strongly supported investment in the UK, it must always be driven by the savers’ best interests.

“Any power to mandate how pension funds invest, if used, creates a very real risk of artificially inflating demand for certain assets. This is fundamentally against how investing should work and increases the risk of asset bubbles that can deflate or burst, with savers bearing the cost,”

The Times concludes that its readers can only escape the defaults hi-jacked by Labour by opting out. Steve Webb is roped into their argument with his answer to the question

“Can savers avoid it?”

One way to avoid mandation is to opt out of the default scheme on your workplace pension, but this brings its own issues,

said Webb.

“You’ve got to know what you’re doing. OK, you don’t want to be in the fund that the government is controlling, but what do you pick? Do you pick the global equity fund, or the balanced fund, or the sustainable fund?”

Savers may opt to move their money if they feel that a particular fund no longer works for them, but they may end up paying more in fees in the long run.

Steve Webb and Ros Altmann have been quoted in this article. I know both and I know they are not against policies that get growth back into our pensions. Clause 40 is not worth the bother – Steve , Ros and other good people – let us not be captured by the ABI’s opposition.

I am ashamed that we are being allowed to be characterised as a part of the ABI lobby that has become the ABI/Pension UK lobby. I am shocked that sane voices such as Steve Webb’s are being used as part of an article that echoes Helen Whately’s opposition.

Can we please turn our thinking to how we can be on the side of pensioners as well as Pensions UK. Right now , I cannot do both.

 

 

 

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Hymans discuss the challenge and opportunity for bosses to pay adequate pensions

Posted on March 15, 2026 by henry tapper

For Methodists and Presbyterians among you, Calum and Mark discuss pensions strategy with the church the Wesley brothers preached  their post-ignition sermon in clear sight behind them. The church is now presbyterian but it has a Wesleyan root!

Calum is Scottish, Mark is English , they are both passionate to make retirement adequate for those who get pensions from the trusts and employers they advise.

Here is an excellent alternative to the LCP podcast I wrote about earlier this morning.

Mark is producing a report on adequacy. I think the essential question is whether employers focus on adequacy or flexibility or try to find ways to do both. I suspect some rich employers with well paid staff may focus on the flexibility of “fix and flex” drawdown from DC and those who have to prioritise adequacy for their staff, will move to CDC.

The boys want employers to take a step back and strategize, as Calum tells us

“I have had 20 years consulting and I have never seen so many balls in the air”

Having spent a few days in Edinburgh where these questions were not being framed with quite the cogency that Mark and Calum frame them, I advise you spend ten minutes with them and then consider where your employer is on this!

Challenge and opportunity

I do not see the debate being just between the Finance Director , the Human Resources Director and the employee benefit consultants. I see the workers voice arising through unions who see an opportunity to press for adequacy rather than flexibility and I see the richer employees wanting SIPPs rather than CDC!

Most large employers have heard demands to keep DB schemes open, then pay more into DC, now the demand from workers and unions may be wider, especially with a pension dashboard spelling it out to ordinary pension savers.

There is a challenge here but there is also an opportunity.

The State Pension Gap

Mark Stansfield’s work suggests that there is typically a £12,000 pa gap between what pensioners need and what they get. This echoes recent work by Royal London which is referred to as the state pension gap.

Calum sees this as a £250,00 shortfall in the pot. The Pensions Commission is due to report on this gap and gaps based on gender and ethnicity too. Bottom line is that “adequacy” is an issue for everybody. For Pensions UK and the ABI, the answer is to increase contributions from payroll into workplace pensions from 8% of band earnings to 12%. Unfortunately that is not happening either at the employer or Government policy level.

Mark points out that at some point after October 2026, individuals will see their pots presented as pension on their phones and other devices. Even if the presentation is of annuities purchasable as level income, they are unlikely to make for comforting reading for ordinary people. Employers will need to move nimbly and move early, if they are not to suffer a backlash from staff feeling cheated.

Compliance or Competitive Advantage?

For most employers, compliance with the pension rules that will follow the enactment of the Pensions Bill will be all that bothers them. For a substantial minority, competitive advantage will be the drive (or perhaps fear of dissatisfied staff and their unions).

Calum and Mark ask if there is an early mover advantage for employers who want to upgrade their pension offering. For such employers, the pension offered to staff is second only to salary and I can see progressive employers moving towards whole of life CDC rather than offering less pension in favour of flexibility. But there is a type of employer who will go towards defending freedom and flexibility and some towards the kind of pension that staff expect from the state and from time in DB schemes.

What should employers do?

Calum and I have a little discussion about what might follow in the months to come. I include it here but if you click through to the comments you can see not just this conversation but useful comments from Richard Smith and others.

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Sam Cobley gives LCP’s view on CDC pension and DC flexibility

Posted on March 15, 2026 by henry tapper

This is a blog about CDC and if you are interested in the subject, I recommend you listen to it. Sam has a very similar career path to Nico  (through banks and consultancy) and while Sam’s still at LCP and advising on £13bn of assets, he sees CDC as an option for DC plans to take on. He is rather optimistic for CDC than the sceptics!

LCP’s Sam Cobley

There is an alarming return to the 70 minutes+ podcast but this is to accommodate an initial discussion of a week when Nico and Darren have been in and on the fringe of the Edinburgh pensions festival.

Is CDC good Value for Money?

The question that the discussion between Nico and Sam have (Darren claiming to be out of his depth) is whether we are seeing the formation of CDC schemes for the whole of people’s lives. I suspect that apart from the Church of England’s affiliated employee scheme (managed and advised on by LCP) , TPT’s and the emerging Pensions Mutual, there are but three schemes. I know of one other consultancy looking to launch an UMES whole of life CDC, but they have yet to show their hand.

For the most part, interest has been not in the transfer of contributions and assets into a whole of life CDC but the Retirement CDC for which we should have legislation by the end of the year and – following the previous pathways, the opportunity to launch a Retirement CDC some time in 2028 or 2029.

For Sam, the interest in CDC is as a choice for trustees and commercial providers and it is quite likely that CDC will be offered as the default for some (WTW made it clear that was the direction they were taking Lifesight, at the Edinburgh Pensions UK investment Conference.

LCP has a largish CDC consultancy team headed by Steve Taylor for whom CDC at all stages and Sam had to pick his way past potential in-house disputes, he being a DC man.

Sam has CFA and is not an actuary and he sees life slightly different from say Adrian Boulding. Sam is an investment man , Adrian an actuary. Sam likes DC, Adrian likes adequacy and Nico definitely prefers the certainty of DC even if that certainty is less than optamistic.

Here was the article Sam published in late January explaining that the (up to) 60% improvement in pensions from CDC depended what you compared CDC to .

If you invest in good advice and upgrade your DC plan (with a consultancy like LCP) you will narrow the 60% considerably. Hymans (who advised Nest to a flex and fix) and LCP who invented the phrase and concept of “flex and fix” are clear in their head that DC can do better than trail CDC by 37.5% (the other way round of looking at CDC doing better than 60%). Chris Bunford, who worked at LCP on Church of England’s putative UMES CDC has been clear that the amount that CDC provides better pension is something between 30-40% and the 75% the PPI claims.

So Sam was not going to retread his paper and explain, as my friend and actuary to Pension Mutual’s developing CDC scheme, explains it, that even if CDC got people a 20 or 30% pay rise for the rest of their lives, it would have done well.

Of course Sam is keen to point out that having a better pension is one thing, having the flexibility to draw your pot as you choose (as you can do till the flex is swapped for an annuity fix – say at Nest’s 85) another.

What price flexibility?

The choice will be I suspect between giving people relatively little pension and maximum flexibility and maximum pension from a CDC, but not much flexibility.

I had a good discussion with Janette Weir of Ignition House, which touches on the bulk of this podcast. Her point was that when you look at what is actually done right now, it backs up the view that CDC will be 60% better in providing lifetime income but only if people are after a pension. Sam makes the point that most people say they want an income , but when it’s explained that this does not mean flexibility, they aren’t so sure.

Here is the central question. Are we after adequacy, in which case we go down the CDC route, or are we after flexibility , in which case flexibility will always win.

My view (for what that’s worth) is that posh people who pay for advice will want flexibility , while ordinary people will find the simple pension of CDC more practical in helping them live their lives with greater comfort or at best “adequately“.

So we are likely to see the debate roll on. Who will promote CDC for the whole of life – well they are likely to be unions and employers who know what adequacy is (but haven’t the money to give it with flexibility) and at the other end will be consultants and employers who pay enough and contribute enough into DC that flexibility is more important than pensions.

Where does this leave Nest and those like them?

My suspicion is that the best of DC will be achieved by the best DC schemes, those advised by the quality of consultants, Nest was advised by Hymans but £13bn of DC money is advised by Sam and I would be surprised if much of that money is going to pass into whole of life CDC!

The CDC solution was not right for Nest because they could not slam the door on flexibility and many other commercial trust based workplace schemes will go the same way.

Which is why I suspect that CDC will work best for employers who are prepared to maximise pensions and leave it for staff to opt-out of CDC if they want flexibility (with fair transfer values we hope).

There will be a small number of UMES whole of life schemes to begin with and none at all if one trade body has its way. But I hope that Royal Mail, CoE , TPT , Pensions Mutual and others will create sufficient momentum that both Sam and Steven Taylor can have a future at LCP and that in a year, we can, as Darren suggests, look back at the gestation of CDC with positivity.

Sam Cobley ended

“we don’t know how many whole of life CDC’s are being formed”

I will end with a hope that Pensions Mutual see

“quite a few whole of life CDC’s emerging, and the first rumblings of retirement CDC this time next year”.

 

 

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Coffee Morning – IHT on Pensions…REALLY!!!

Posted on March 14, 2026 by henry tapper
avatar Steven Goddard
CEO
Pension Playpen

Coffee Morning – IHT on Pensions…REALLY!!! CPD included

Type – Teams Online

When – Tuesday 17th March at 10:30am

You are cordially invited to attend our next Coffee Morning. At this event we are delighted that Mark Plewes from WBR Group will be presenting his thoughts on the change in IHT for the Pensions landscape.

He will give us his thinking of an overview of where things sit with the current IHT proposals on unused pensions passing through parliament and any lingering concerns that there might still be around implementation and issues. He will also want to touch on how the potential complexity of the plans might impact outcomes for beneficiaries and whether there is presently a risk of wider detriment and scam activity in terms of the confusion that such a change will cause.

Background:

In December 2025 the Government published the Finance Bill containing provisions to bring pension scheme death benefits within the scope of inheritance tax from 6 April 2027.  We look at what has changed since the legislation was originally published in draft, and consider what action SIPP and SSAS providers need to be taking now.

Agenda

  • What to do now?
  • How will pension planning change?
  • Occupational vs SIPP/SSAS?
  • What are the alternatives?
  • Will a new government U Turn this decision?

TO REGISTER

Please add to your calendar and click HERE on the day 

Mark Plewes is Head of Technical at WBR Group and recently appeared by invitation at the House of Lords to inform the  pensions finance bill debate.

Mark has been at WBR Group for over 3 years and prior to this role he was Senior Technical Specialist at Rowanmoor.

This should be a lively session with emotions running high!!.

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Utmost fined nearly £2m for its sins of the last 10 years.

Posted on March 14, 2026 by henry tapper

 

Angie Brooks is right to point out that governance matters and it matters for Utmost whether it happens to its UK bulk purchase business or its offshore investment bonds.

Utmost was the Equitable and is now owned by US Private Equity. Thanks to Angie for keeping us informed of happenings in Guernsey.

This is the same Utmost that has recently been bought by JAB, about which I have written here.

Utmost are still buying out British DB pension schemes sponsored by UK companies. These pensions are the heritage we have built over the past 50 years and I would, like Angie Brooks, ask why we are not asking questions about the provenance of Utmost.

More widely, I would ask pension scheme trustees to consider risk , not just from the existing sponsor’s potential failure but of the failure of the insurer.

A TAS 300 report on the risks of buy in/out against those of continuing on as a pension scheme , transferring to a pension superfund or transitioning to a new sponsor makes sense.

It has taken Guernsey Financial Services at least ten years to catch up with Utmost and the Isle of Man regulators still haven’t got there. How long should we assume all is right with Utmost and indeed all insurers. They may not all have the problems Utmost have with governance but Utmost is not the only insurer with links across the pond and in particular to Bermuda.

Home of Utmost

 

 

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A strange take away for a professional in Edinburgh last week

Posted on March 14, 2026 by henry tapper

If your journey to Edinburgh this week was to improve the lot of pensioners from pension investment, you may wonder about this take away.

I am surprised that a senior representative of professional trustee Zedra wants to display his “stash”. Is this improving his capacity to do his job? I leave it up to you to decide.

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Dirty tricks of some workplace pension schemes

Posted on March 14, 2026 by henry tapper

In a recent blog, I pointed to a report that Jonathan Stapleton brings to life with quotes from those working for the personal pensions on the wrong end of the transfer delays (who represent their customers as well).

There is a strong inertia in DC pensions that is created by those who hold the bulk of the money either in legacy personal and section 226 pensions (FCA regulated)  or by occupational pensions governed by trustees but controlled by administrators who are neither regulated by TPR or FCA.

The argument is simple, rather than adopt the kind of technology that allows money to move from one bank account to another, the holders of DC money have adopted “sludge practices” that leave consumers unable to get what they consider VFM. What is worse is that the VFM Framework will do little to help the consumer.

Here are takes  from Jonathan Stapleton’s article which goes into the remedies put forward from those quoted (the actual report is here)

It warned that, as the government prepares for the launch of the pensions dashboards, any increased visibility without a modern transfer system would only lead to mass consumer frustration.

And it said savers were currently “confined” by a 180-day statutory limit on transfers – a limit it said seemed “out of touch” with the rest of modern finance, where a bank account can be switched in seven days and a cash ISA transferred in fifteen.

The report also cited how so-called legacy providers use what it called “sludge practices” – such as requiring signatures on paper forms – to delay transfers. It said even more concerning was the “outright misuse” of anti-scam legislation, where it said firms trigger “amber flags” for schemes provided by prominent providers regulated by the Financial Conduct Authority (FCA).

The coalition of providers .. called on the government to adopt a series of reforms to the system.

Not every digital savvy provider has been a part of this report (I can think of Collegia and Penfold who are missing) but those who make it on the list are to be commended. Here are those who have put time and money into making this report which I urge you to read.

In particular, they called on the government to cut the transfer deadline to 30 working days and for the introduction of a “digital-first” presumption that makes manual paperwork the exception rather than the rule.

The report also recommended universal “due-diligence checklist” to ensure transparency over the reasons for blocking transfers, alongside a long-term pensions tax roadmap to avoid the speculation that precedes every Budget.

The call for action follows a consultation by the FCA, Adapting our requirements for a changing pensions market (CP25/39), which closed on 12 February.

Moneybox director of personal finance Brian Byrnes said:

“For too long, legacy providers have lagged in adopting innovations that improve saver engagement and outcomes. The FCA must look beyond headline statistics and examine why pension transfers so often stall. There are cases where providers flag ‘overseas investments’ while offering the same global tracker funds themselves, raising questions about whether these flags are being used to frustrate legitimate transfers and retain customer funds.”

PensionBee UK chief business officer Lisa Picardo added:

“Individuals carry the risk if their retirement savings fall short, so they should have real choice over how and where their money is invested. They must also be free to move providers easily, yet the transfer process still isn’t fit for purpose.”

People need pensions to be properly marketed – like this (anonymised)

AJ Bell director of public policy Tom Selby agreed:

“Government, regulators, and the pensions industry need to work together to tear down any existing barriers to support the government’s retail investing drive and turn Brits from savers into a nation of investors. Driving down transfers times across the market is essential, as is aligning the regulatory approach for retail and workplace pensions so we can deliver better outcomes for investors and support the UK’s retail investment ambitions.”

Hargreaves Lansdown Head of Retirement Analysis Helen Morrissey added:

“The pensions market is changing and personal pensions have a growing role to play, helping people take control of their savings, and understanding how to build for the retirement they want. Regulation should support this end with transfers taking days not weeks. The current pension transfer system is woefully out of step with wider financial services.”

Freetrade chief executive Viktor Nebehaj added:

“The current pension transfer system is not fit for purpose. At a time when consumers can switch bank accounts in days, it is unacceptable that pension transfers still have a six month deadline. Outdated, manual processes restrict choice, frustrate savers and risk undermining the benefits digital pension platforms can deliver. We need urgent reform to make pension transfers faster, simpler and fit for modern consumers.”

 

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Personal Pension providers opening doors for the unloved consumer

Posted on March 14, 2026 by henry tapper

I’ve been talking a lot about collective pensions to the point that you may think I’m disinterested in”pots” arising from DC pension saving. This is not the case.

This blog is about an excellent report produced by this group of DC consolidators that do it using  personal pensions. Here the investment can be done yourself (SIPP) or left to fund managers as simple personal pensions. Here is the list- delivered alphabetically.

congratulations to them for working together

Transfers are not restricted to “pots”. In years to come you’ll be able to transfer to CDC  as you can today with a  public  sector pension (including LGPS) ; with pension schemes you can swap DC pots for inflation linked pension.

But right now it is the retail personal pensions who are doing the heavy lifting for everybody else and having to do so because many of those providers not on this list are the cause of the trouble.

Here is the executive summary of the report…

If this is not important to the pensions industry, I do not understand . I have just returned from three days when pensions were discussed. Personal pensions were not discussed at any time, by anyone on the dance floor of its auditoriums.

Here is  the finishing paragraph of the executive summary. It is of course a two way transfer

The Pension Commission is looking into the fate of those mentioned above who have no occupational pension or even workplace saving for a pension. Those people include the self-employed and those who have left work for whatever reason (including health) who must make the best of what they’ve saved. They are being badly treated and here is the report for you to read here or download here

 

 

 

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Mandating – Government seizing “Henry VIII powers”?

Posted on March 13, 2026 by henry tapper

I think we will see the last days of the debate over the Pension Schemes Bill as some of the maddest pensions have seen this century.

I had supported Baroness Altmann’s view that schemes that don’t invest more of our money into the UK should lose their tax relief (tax relief was granted so that pensions helped tax-payers in among other things growing our economy through investment).

But now the good Baroness seems to have swung through 180% and joined those who are calling for the scrapping of the mandation clause allowing Governments to enforce investment as it sees fit.

At the recent Pensions UK Conference, I suggested that Tom McPhail, who seems to share the views of Ros Altmann, be made into a Shadow Pensions Minister by being made a peer! Ros Altmann is a former Pensions Minister who now sits in the House of Lords.

The proposal is an amendment from the Conservatives to scrap mandation and is as likely to find favour with a Labour Government as the changes proposed to the limits on salary sacrifice

This is the argument for them doing so – set in the Daily Mail

ROS ALTMANN: Government is seizing ‘Henry VIII’ powers to dictate how pension savers’ money is invested

The Government wants unlimited powers to put workers’ pension funds into high-risk investments in private equity, private credit and maybe even ministers’ ‘pet projects’.

The ‘Henry VIII clause’ of the Pension Schemes Bill currently going through the House of Lords contains astonishing provisions.

They would enable Ministers to issue diktats to pension schemes that they must invest in whatever projects or assets – and in whatever quantities – the Government decides.

These dangerous proposals need to be amended to protect ordinary workers’ pensions – Government does not know best how to invest.

Ros Altmann: House of Lords will try to remove mandation power altogether, or water it down to just Mansion House Accord limits

Ros Altmann: House of Lords will try to remove mandation power altogether, or water it down to just Mansion House Accord limits

The policy known as ‘mandation‘ is supposedly based on the Mansion House Accord, but could turn what is meant to be a voluntary agreement into compulsory directions.

Most major auto-enrolment pension providers have agreed with the Government that they will invest at least 10 per cent of their workplace ‘default‘ funds in high-risk private or unlisted assets by 2030 with half, at least 5 per cent of the funds, in the UK.

These assets include private equity, private credit, AIM shares, Acquis shares, venture capital and interests in land.

Ordinary workers’ pensions will be affected

The vast majority of staff’s pension savings are in the ‘default’ funds that would be affected, since most people do not opt to actively move their money into other investment funds within their schemes.

So, this could potentially affect many people’s eventual retirement pots.

Ministers insist clause 40 of the Pension Schemes Bill, which would enshrine into law the kind of sweeping might the monarch Henry VIII would have wielded, merely involves ‘backstop‘ powers.

They say the powers will only be used to force schemes to invest as Government dictates if they don’t do it themselves, so we don’t need to worry about the Henry VIII clause.

But that is precisely the worry. Once the measure is in primary legislation, the Government could use it as it wishes and any assurances about not intending to use it may prove worthless.

Meanwhile, the pension providers’ investment intentions are dependent on the Government itself complying with several requirements.

The voluntary investment commitments in the Mansion House Accord depend on Government fulfilling certain obligations, such as ensuring pension funds have a good pipeline of investible projects.

It must also move the emphasis in ‘value for money’ rules away from lower costs to better value – because cheap does not necessarily mean good – and encourage larger-scale pension funds with more capacity to invest in higher-risk projects.

In practice, however, even if the Government does not deliver on its own commitments, the new legislation could just force the funds to invest in any assets it tells them to.

These could be projects that pension trustees would not wish to back on purely economic or financial grounds, but as this is written into law they may be unable to refuse.

Manion House Accord: Major pension firms have agreed to invest in high-risk private or unlisted assets - but the deal struck with the Government is voluntary at present

Manion House Accord: Major pension firms have agreed to invest in high-risk private or unlisted assets – but the deal struck with the Government is voluntary at present

Can this power grab be stopped?

There has been significant Parliamentary and industry pushback against the Pension Schemes Bill’s extensive Henry VIII powers.

House of Lords will try to amend it to either remove this mandation power altogether, or water it down to just Mansion House Accord limits

If we don’t succeed, the Bill will give Ministers unlimited powers. They could set the amount or type of assets pension funds have to buy, thereby shifting pension fund investment focus away from higher returns towards a political agenda.

Pensions UK, the Association of British Insurers and other industry bodies are all concerned about the broad wording of the provision, which could go far beyond the supposedly intended scope.

Ideally this clause should be removed entirely. At the very least it should be heavily restricted with proper safeguards against ministerial overreach.

Pension Schemes Bill would enshrine into law the kind of sweeping might the monarch Henry VIII would have wielded, says Ros Altmann

Pension Schemes Bill would enshrine into law the kind of sweeping might the monarch Henry VIII would have wielded, says Ros Altmann

Government has already made a serious investment blunder

The Government has already shown it cannot be trusted with the power to dictate investment decisions.

It is proposing to prevent pension firms from using investment trusts and REITs – real estate investment trusts, which invest in property – to fulfil the obligations to invest at least 10 per cent in high-risk, illiquid assets under the Mansion House Accord.

Ministers have specifically stated, without any coherent justification, that pension funds can only use either unlisted Long-Term Asset Funds -which are ‘open-ended’ structures, that issue new shares and allow inflows and outflows far more suited to liquid assets – or direct investments in the relevant assets.

Investment trusts or REITs are banned even if they hold the desired private assets of exactly the type which the Government wants pension funds to support.

That is despite them being far more suited to investing in illiquid assets because they are ‘closed-ended’, meaning they have a fixed number of shares that can be easily bought or sold without the fund manager having to change the portfolio of assets.

Closed-ended listed investment companies have built up long-standing experience in managing such assets, and offer pension funds which do not have such expertise the opportunity of investing in ready-made, expertly managed diversified portfolios.

Specifically excluding the use of these more fitting closed-ended listed companies reveals that Government is unqualified to decide which assets pension funds must invest in.

 How do I stop my pension being used to promote economic growth – I think Rachel Reeves is ignoring the risks

article image

Risks of these dangerous new powers

The new ‘mandation’ powers the Government is giving itself could create asset bubbles and put pension savings at risk.

A prime concern is that forcing pension funds to invest in potentially underperforming assets – such as HS2-type projects or possibly overvalued private equity and private credit – could mean lower returns and lower pensions in future for millions of workers.

Pension funds could be forced to invest into a limited pool of UK projects, which could drive up asset prices, creating market bubbles and exacerbating risk.

Excluding the option of using investment trusts would restrict the investment options even further, making market distortions worse.

All this could further damage members’ pension prospects.

Here is the current state of play in the Upper House (the Lords)

 

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Productivity green shoots boosted by financial services;-Thomas Aubrey

Posted on March 13, 2026 by henry tapper

Productivity green shoots boosted by financial services

The latest data suggest the UK’s labour productivity may finally be emerging from a lengthy period of stagnation thanks to a pick-up in financial services. Thomas Aubrey highlights the potential of the Insurance sector to drive productivity growth further by taking advantage of cyber security and AI insurance opportunities.
Green shoots

After a long period of stagnation, between Q3 2024 to Q3 2025 UK labour productivity grew by 1%. This modest growth is welcome. But the improvement might be larger as this figure is debated due to the fall in responses to the Labour Force Survey (LFS); the denominator of this labour productivity measure. The Office of National Statistics (ONS) now provides an additional productivity metric using the number of employees derived from HMRC PAYE data. This measure suggests labour productivity grew at 3% instead.

There are, however, uncertainties around both figures. While the HMRC PAYE data is more accurate for the number of employees, it doesn’t provide data on self-employed or hours worked – both of which continue to be collected via the LFS.

The challenge for productivity analysts is that only the LFS dataset enables productivity to be assessed from a bottom-up perspective which provides an insight into what is happening across sectors. And the LFS sectoral data reveals some important shifts that have taken place since 2019.

Between Q3 2019 and Q3 2024 private sector labour productivity shrank by -1.8%, but it grew between Q3 2024 and Q3 2025 by 0.2% (Table 1). Moreover, just over half of the private sector contributed positively to productivity growth over the last year, whereas only just over a third contributed positively between 2019 – 2024.

While this shift is positive, it is important to note that most of the 1% headline growth in the most recent period was due to the public sector “Between Effect” caused by an increase in its labour share. However, the public sector will most likely begin to generate a negative “Between Effect” as the civil service is expected to cut headcount by 8%, with people likely moving to lower value-added services roles. In any case, the policy focus must remain on driving private sector productivity growth.

Productivity grows when firms are able to increase value added per hour by creating a competitive advantage in the way labour and capital of all kinds are deployed, and by increasing the labour share in higher value-added activities. While it is positive that the majority of private sector industries are now contributing to growth (in green), it remains a concern that both Mining & Quarrying and Manufacturing (both of which are high value-added) continue to contribute negatively (in red). The data also suggests that government attempts to revitalise Manufacturing through its industrial strategy have so far had a limited impact.

Table 1: Sectoral productivity disaggregation Q3 2024 – Q3 2025[1]

The high value Financial Services sector contributed most to recent productivity growth due to its increase in labour share. Between Q3 2024 and Q3 2025 exports of Financial Services grew by 7% with the Insurance sector growing at 8% indicating a strong demand for these services (Chart 1). Conversely, goods exports decreased by 5% over this period.

Chart 1: UK Exports of Insurance and Financial (banking) services 2016-2025 (current prices)

Source: ONS

By far the largest export destination for traditional insurance services is the US – accounting for 42% of exports followed by the EU at just 16% and Canada & Australia at 14%. In 2016 when the UK was part of the EU, exports to Europe accounted for just 15% of exports, highlighting the fact that there was no single market in financial services for UK firms to exploit. Each member state typically has its own regulator, rules and product requirements.

The digital transformation of the global economy is, however, unlocking new opportunities for the UK insurance sector. For example, the market to insure cyber risk is estimated to be worth $50bn by 2030 which is largely dominated by US firms. The UK has an underdeveloped cyber insurance market despite the fact that the UK faces more cyberattacks than any European nation which is a significant opportunity.

Further opportunities for the UK insurance sector are being created by firms seeking insurance for their AI products and services including autonomous vehicles, robotics, AI‑Driven Healthcare and Diagnostics ad well as for Generative AI. But to achieve a growing market share will require the sector to clearly understand the risks involved and levy an appropriate premium that is both attractive for firms while managing future liabilities.

The challenge for the insurance sector though is that there isn’t a history of loss data upon which to develop new models, and hence the industry will have to develop new approaches to pricing this risk. This includes managing systemic risk in the event that a widely used AI model such as a large language model fails, which in turn forces thousands of companies to fail and potentially the insurance company too.

Each frontier sector that is contained within the IS-8 has the potential to drive growth. Indeed, the government’s Financial Services Growth and Competitiveness strategy references the need “to make the UK the location of choice for insurance and reinsurance” with a focus on regulation. But if the UK insurance sector is to scale up and become a global leader in AI and cyber insurance, it is the insurance sector itself that will need to draft a plan to grow not the government.

Although the green shoots of a productivity recovery are beginning to emerge, it is too early to tell whether UK firms have indeed found new forms of competitive advantage to compete in global markets. The UK insurance sector certainly has the deep expertise and skill to scale up in new markets such as cyber security risk and AI should the sector decide to come together and formulate a coherent growth plan.

[1] The sectoral disaggregation uses GEAD (Generalized Exactly Additive Decomposition) based on Tang & Wang (2004). The ‘within’ effect is productivity growth in activities within the sector whereas the ‘between’ effect measures the change in relative size of sectors taking into account the reallocation of labour between sectors and changes in real output prices. e = estimated as ONS does not publish these values.

 

The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.

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