Rachel Reeves wants UK pension funds to “unlock billions” in investment and deliver for British savers by following the Canadian model.
The Chancellor is considering consolidating local government pension schemes – currently fragmented into 86 individual funds and 6m members – to pool their £360bn of resources.
It comes as she met with the so-called Maple Eight group of Canadian retirement funds at a roundtable in Toronto on Wednesday, during a three-day North American trip.
Funds like the Ontario Teachers’ Pension Plan and the Canada Pension Plan are significant infrastructure investors, including in the UK, and Reeves wants UK schemes to follow suit.
Reeves said: “The size of Canadian pension schemes means they can invest far more in productive assets like vital infrastructure than ours do.
“I want British schemes to learn lessons from the Canadian model and fire up the UK economy, deliver better returns for savers and unlock billions of pounds of investment.”
She added: “We’re already beginning to see schemes announce plans to invest. That’s a vote of confidence in our work to fix the foundations of the economy, rebuild Britain and make every part of our country better off.”
A new review, led by Labour’s new pensions minister Emma Reynolds, is set to look at how to create equivalent UK megafunds and deploy these to drive economic growth.
The Chancellor has also confirmed her first Mansion House address will focus on the financial service sector’s role in delivering more investment and financing growth.
She wants to partner with industry and regulators to deliver stability and new technologies, the Treasury said.
Miles Celic, CEO of TheCityUK, called Reeves’ approach “encouraging” and said: “Her clear commitment to fostering voluntary participation is notably welcome by the industry and it ensures pension funds can make strategic investment decisions without mandates.
“Efficient pension investments play a critical role in delivering better outcomes for individuals in retirement and boosting growth across regions and nations of the UK.”
While Michael Moore, British Venture Capital Association (BVCA) chief executive, added: “Further consolidation of pension schemes to address the UK’s fragmented market is needed to increase pension schemes’ ability to deploy capital into UK private capital funds.
“The Chancellor has a real opportunity to deliver economic growth by facilitating increased investment in the UK’s most innovative businesses.”