Rachel Reeves just seized control of your pension – gambling with it | Personal Finance | Finance

Chancellor Rachel Reeves has been circling our retirement savings for months. He wants the power to direct where our workplace pensions are invested for his own purposes. Rather than allowing schemes to invest anywhere in the world to give members the maximum possible return, they want to dictate what products they can invest our money in. This opens the door to funding Labour’s pet political and environmental projects, such as Ed Miliband’s net zero charge, rather than prioritizing building your wealth. Worse, he’s dying to try his luck in risky private markets. He’s making a desperate £50bn gamble to use your money to create growth. If things go wrong, millions of retirees could end up impoverished

Money in defined contribution workplace pensions is currently spread across shares, bonds, property and other assets, building for the future while paying out existing members. Trillions of pounds are invested this way and scheme trustees are responsible for making strategic decisions about where to invest. Now Reeves wants to nullify these powers in order to seize some of them. His plan is to direct pension money into UK projects, private markets and infrastructure in a bid to stimulate the economy. And it’s almost there.

Under the Mansion House Agreement, major pension providers including Aviva, Legal & General and M&G have agreed to invest at least 10% of their workplace default funds in private market assets by 2030, with at least half in the UK. This had to be voluntary. But Reeves wanted more control, so Labor inserted a clause into the Pension Schemes Bill giving ministers a “reserve power” to force compliance if the plans fell short.

Trustees, whose legal duty is to act in the best interests of savers, were suddenly faced with Westminster telling them how to invest. The House of Lords, which Sir Keir Starmer had previously promised to repeal, recognized the danger and rejected the clause, warning that it gave ministers broad powers with few restrictions. Pensions industry figures have also opposed this, warning that investment decisions will shift from the hands of trustees and investment experts to the hands of politicians. Despite growing alarm, Labor took this to the House of Commons yesterday.

MPs have given ministers controversial “reserve powers” to direct plans to private markets. The government insists this will only apply to 10% of assets, 5% in the UK. Ministers insist the reserve powers are merely a “fallback” to ensure all pension providers comply with the Mansion House Agreements.

But the Conservative Party’s shadow chancellor, Sir Mel Stride, dismissed it as a political takeover of private assets and described it as an “economic rescue package” that allowed Rachel Reeves to tap into her retirement savings to solve her own problems. Stride said: “Your savings should be invested in your own interests, not to fund Rachel Reeves’ pet projects.” He’s not the only one worried.

Pensions campaigner Baroness Ros Altmann warned the plans would give future ministers broad powers to direct billions of dollars into politically preferred assets, even if administrators decide it is not in members’ interests. “There is no reason to believe that the government knows better than professional managers how to invest its members’ money,” he said.

Retirement savings belong to workers, not the Treasury. But Labor has talked about releasing up to £400bn for investment in the UK. This is a huge sum of money, and when ministers have power, the incentive to use it will increase. Private markets can offer higher returns, but they are harder to value, less transparent and can turn quickly. Some parts of the industry are already struggling as companies are stuck with assets they have difficulty selling. They will love our retirement plans that will save them from this trouble of their own making.

Reeves takes money that doesn’t belong to him to spend. If trustees are pushed into political rather than financial decisions, the long-term damage could be serious, and retirees will pay the price. The House of Lords will fight on, but if they fail the fate of your pension could end up in the hands of the Chancellor. This will allow Rachel Reeves to do the same to your retirement as she did to the UK economy. It’s a scary thought.