Pensions Minister Torsten Bell has called for a pensions revolution to ensure savers reap higher returns and enjoy a better standard of living when they retire. Addressing industry leaders at the Pension and Lifetime Savings Association Conference 2025 in Edinburgh on March 12, Bell urged for transformative changes that could amplify the retirement funds of everyday savers.
Bell also touched upon the broader objective of enhancing investment and spurring growth within the UK’s sluggish economy. His presentation to the pension sector’s top brass was a bid to broadcast the government’s commitment to economic growth amidst recent lacklustre performance indicators.
The rising Labour party figure said: “Today’s problem is how do we deliver higher returns for savers, so they can have a decent standard of living in retirement without asking any more than is necessary of their standard of living in the here and now.
“Or asking them to become a pensions expert – which is your job. Getting absolutely the best value for savers is the priority to any wider debate on savings levels.”
His address dealt with overarching themes and targeted industry experts. However, the underlying goal of his message was straightforward – to uplift the UK’s pensions industry.
The deep dive into private pensions illuminates two distinct categories available to savers.
Defined contribution pensions are essentially a savings pot that grows depending on the contributions made, while defined benefit pensions are typically employer-based and calculated based on salary and tenure. He emphasised the need to “step back to focus on the big picture of where our priorities must be as our defined contribution saving landscape matures and defined benefit schemes see their funding positions changed materially.”
He argued: “On the former my big argument is we have to pay more attention to returns for savers rather than just to costs, or savings rates – important as both those are. Celebrating the success of auto-enrolment can no longer be a substitute for answering the harder question: What does the best landscape for those savings to be managed in look like? Both to maximise returns for savers and to ensure those savers live in a country that is investing and growing again after a long decade of economic stagnation.”
Addressing one of the government’s key pension strategies, he stated: “Now, our view is that scale does matter. We want fewer, bigger, better pension schemes.”
He added: “That is already the direction of travel – for a whole host of reasons. We are merely providing extra wind into the consolidation processes’ sails.”
He also noted: “Of course, some smaller schemes deliver great value for money. But for the market as a whole, and savers on average, consolidation is desirable. Larger schemes are better placed to invest in more productive asset classes.
“This is a diversification as important as that of geography, which rightly gets so much attention. Scale also helps reduce costs – and increases bargaining power.
“That both can help provide the headroom for building investment capability or just better returns for members. Around the world we also see that scale matters for the nature of ownership.
“Only large pension schemes can provide active, engaged ownership of the kind that presses management not just on short term returns today but on whether they can deliver over the long term.”
He emphasised this was not an isolated issue but part of broader necessary reforms, specifically calling for greater UK economy investment by pension funds, which, according to the government, will enhance UK growth, leading to more jobs and higher wages.
He stated: “Employers, including any in the room today, will have no excuse for ignoring what matters most to their employees. But we also need to focus on value in debates and, to be frank, in sales pitches. Now why do I focus on enabling productive investment?
“Because we do so little of it. DC (defined contribution) pension funds allocate 3% to infrastructure and 0.5% to private equity.
“That compares to an 11% infrastructure allocation in Canada, and 5% to private equity in Australia. Every percentage point counts, or part of a percentage point matter when this investment can deliver not only returns for savers but also contribute to economic growth and if you want a simple summary of the government’s economic strategy this is it: It’s time for Britain to start investing in its future again.
“Again, this shift to investing in a wider range of assets is again one we are encouraging rather than instigating. Many of you have told me about changes you are already delivering, building new capacities or partnering with others.
“I want to acknowledge the work going on across the industry to realise this shift. And from learning from parts of the industry that have been doing this for decades.”
He said that by June, the government will unveil a 10-year infrastructure strategy. He highlighted the role of the British Growth Partnership in facilitating venture capital investment opportunities for pension funds.
Additionally, his address covered proposals to consolidate the UK’s numerous council pension schemes. The objective is to amalgamate these into a smaller number of larger funds which, he believes, will “deliver for members and their communities.”
