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A Reform UK government would consolidate local council pension schemes into a near-£500bn “sovereign wealth fund” that it claims would boost economic growth by investing in British businesses.
Reform deputy leader Richard Tice said it would be one of the top eight largest funds in the world and could generate an annual surplus of between £20bn and £30bn a year.
“It will have a strategic British growth mandate,” he said, as he accused the existing local government pension scheme of being “disparate, uncoordinated” and having “no vision”. “This is such a huge opportunity, it’s an absolute game-changer.”
The LGPS in England and Wales has about £402bn in assets, with Scotland and Northern Ireland having another £78bn at the end of March last year.
The scheme is split across 98 administering authorities in the UK, 86 of which are in England and Wales. These 86 are in the process of merging their assets after the Labour government announced last year that all of their assets must be in one of six “pools” by this April. Council funds in England and Wales have 17 per cent of their assets invested in the UK at present.
Tice gave the example of British Steel as a business the fund could invest in, helping to refurbish its blast furnaces.
Tice used his press conference on Tuesday — his first as spokesperson for business, energy and trade — to announce that a Reform government would repeal all net zero targets, zero-emissions vehicle mandates, employment rights and property rental rules introduced by the current Labour government. He also announced that Reform would introduce “heavy tariffs” on Chinese cars.
As part of the pension plans, Reform said that new workers joining the LGPS would be offered a defined contribution pension, with the defined benefit element to be closed to new members. The pensions of existing council fund members would be unaffected.
Tice said this would enable councils to cut existing employer contributions to about 10 per cent, “saving councils millions and millions every year”. The average employer contribution in the LGPS is about 21 per cent of pay.
The announcement echoes a similar proposal made by the Tony Blair Institute in 2023, which advocated consolidating the UK’s “fragmented” pensions landscape into a so-called superfund to drive investment in British infrastructure and industry.
Tice said the scheme was underperforming “hugely” by “£8bn to £10bn per year”. But pensions experts were sceptical that Reform’s proposals would necessarily deliver better returns by focusing more on UK investments, pointing to the scheme’s average annualised returns over the past decade of more than 7 per cent. “This is not a free lunch,” said Sir Steve Webb, a former pensions minister and now a partner at consultancy LCP. “If this turns out to generate lower returns . . . council taxes would have to go up.”
Increasing the fund’s allocation to equities could also make the performance more volatile, leading to bigger changes in the level of contribution rates that are set every three years.
Webb added that the impact of putting new joiners into a defined contribution scheme would be “an incredibly slow burn”.
John Ralfe, an independent pensions consultant, said that LGPS “cannot become a SWF, whatever Reform may think” because it had made promises to pay pensions to its members.