UK Pension Schemes Could Boost Savings by Up to 35%
More sizable pension schemes with “enhanced” asset-ownership capability may lift retirement savings by roughly £20,000 (5%) up to £100,000 (35%) over a typical working life of 40 years, overall in the UK, as reported by Invesco and People’s Pension.
The Built to Grow report indicates that UK economy can benefit from increased investment returns of 0.25 to 0.75 percentage points annually, potentially rising to 1.25 percentage points, by leveraging scale, capability, and governance.
A study based on scenario modelling reveals that the UK economy could gain an additional £75bn to £110bn annually over 20 years if a larger group of capable asset owners is established, with a potential £30bn to £90bn directed towards UK private markets.
Consolidation reforms and regulatory measures are paving the way for a new generation of pension asset owners, but the report emphasizes the need to focus on building robust investment institutions with effective governance and decision-making capabilities.
The report proposes an alternative ‘hybrid’ model of asset ownership, where pension schemes collaborate with specialist providers to access additional expertise while retaining control over strategic investment decisions.
Commenting on the findings, People’s Pension CIO, Dan Mikulskis, said: “The UK has an opportunity to develop a pensions system that works even harder for millions of savers and for the wider economy. This research shows that scale really does matter, but what matters even more is how that scale is used. Greater asset ownership has the potential to improve retirement outcomes while also supporting investment in Britain’s future.”
The report examined the potential impact of UK pension schemes adopting asset ownership models, similar to those used by Canada’s Maple 8 funds and Australia’s superannuation sector.
Invesco senior managing director and co-head of investments, Tony Wong, added: “A key insight from this research is that successful asset ownership does not follow a single model. Around the world, leading pension organisations have adopted different approaches shaped by their governance, regulatory and market environments. As schemes grow, scale creates greater strategic optionality, but it should not be viewed as a choice between insourcing and outsourcing. The most successful organisations often combine strong strategic oversight with specialist capabilities in different ways to support their long-term objectives.”
