The Chancellor’s recent Budget and accompanying speech have stirred a complex response from the UK investment community, highlighting both optimism and caution around new proposals to drive domestic growth through innovative investment strategies. Reactions centred on measures such as the proposed Pisces (Private Intermittent Securities and Capital Exchange System) private stock market system to be established by May 2025, the consolidation of pension funds, and the potential of new incentives aimed at bolstering UK-based assets.
The speech focused on several key economic reforms aimed at injecting more capital into UK assets and driving economic growth. Reeve discussed Pisces as a way to boost the UK market by helping support the pipeline of future listings on the public markets.
Sam Hields, partner at OpenOcean, pointed out the mixed signals for investors, noting that while Chancellor Reeves has worked closely with the investment community, questions remain about whether the initiatives, including the private stock market and pension “megafunds,” will yield tangible benefits or add “more hot air to the debate.” He expressed concern about the Pisces initiative, likening it to the SPAC boom and warning of risks if companies are fast-tracked to public markets prematurely. “On the upside, since Pisces isn’t open to the general public, this could provide a layer of control and limit exposure to speculative investments,” Hields added.
Lou Davey, head of policy at Independence Governance Group, a provider of professional pensions trusteeship and governance services, emphasised the importance of building a coherent strategy that integrates the various objectives of the reforms without compromising trustee obligations. “We are pleased that the government has decided not to mandate investment in particular asset classes,” she said, cautioning that trustees need assurance on the quality of UK-based investments to ensure fiduciary compatibility. Davey underscored the need for a value-for-money framework considering long-term returns and the potential impact on pension schemes. Welcoming the consultation on DC reforms, which addresses key challenges, including the role of employers and poor-value legacy contracts, Davey added that the Government’s LGPS consolidation plan could serve as a model, demonstrating how investing in UK assets can spur growth and encourage other schemes to follow without regulatory pressure. However, Davey expressed “disappointment” with the lack of further announcements on utilising growing DB scheme surpluses for members, employers, and the economy, especially given recent HMRC guidance that may restrict surplus returns, hoping for progress in this area soon.
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Welcoming the Mansion House proposals, Schroders said that while scale is important, the main focus in the DC space should be on achieving good outcomes for members by moving beyond price competition, enabling master trusts to invest in higher-return assets. Schroders also views complete pooling in the LGPS sector as an opportunity to set higher standards in performance and service, emphasising the need for strong investment expertise and innovative solutions to support the needs of millions of public sector workers.
At PwC, Roshni Patel, head of DC pensions and benefits, remarked that consolidating DC funds could increase resilience and returns, especially given the limitations faced by smaller providers during market volatility. However, Patel observed that without added incentives, there’s no guarantee that investors will favour UK assets. She also pointed out the potential of Collective Defined Contribution (CDC) schemes to create a more stable, long-term investment pool, particularly in supporting domestic growth.
Mark Jennings, head of employer covenant & Restructuring at PwC UK, talked about the government’s plans for Local Government Pension Schemes (LGPS), noting the potential for asset pooling to stimulate the UK economy. However, he highlighted challenges around timing and mandate specifics that could impact how effectively these funds contribute to economic growth. “The funds’ assets are there to protect members’ benefits, and… how quickly this can be implemented and then investment diverted to major UK projects will determine how quickly this ultimately leads to the desired economic growth,” Jennings said.
Karen Northey, director of corporate affairs at the Investment Association, welcomed the Chancellor’s growth-oriented approach, particularly the regulatory shift towards a balanced risk perspective. “The proposals to broaden access to private markets through Pisces and plans to make the UK a leading centre for green finance indicate a positive shift towards a growth-focused mindset,” she said. The scale achieved through pension fund consolidation could channel more capital into high-growth UK businesses and infrastructure, Northey added, provided there is “governance, accountability and appropriate investment expertise to deliver the most productive outcomes and create value for money for savers”.
Hields and others also flagged potential downsides, with concerns around the National Insurance increase for employers seen as a barrier to entrepreneurial growth. As he put it: “At the end of the day, it’s about incentives, and this might be one step forward after two steps back.”
