Last month (May 2025), the Chancellor Rachel Reeves provided more information about the reforms to the UK pension industry that had been announced by the government last year, including the creation of £25bn ‘megafunds’ that will be used to help drive localised economic
growth.

What is a pension ‘megafund’?

The pension megafunds will be created through the consolidation of defined contribution schemes and the pooling of assets from 86 separate Local Government Pension Scheme authorities.

These megafunds will be similar to those in Canada and Australia, where large pension funds are invested in assets that have higher growth potential. Government analysis found that pension funds deliver much greater productive investment levels once the size of assets they manage reach between £25-50 billion, at which point they are better placed to invest in a wide range of assets such as new business ventures and large infrastructure projects.

How would it work?

“These reforms mean better returns for workers and billions more invested in clean energy and high-growth businesses,” said Chancellor Rachel Reeves – but how will they work? The planned pension megafunds will cover retirement savings for the majority of British workers
in two ways:

1. The 86 different local authority pension schemes worth £392bn will be merged into six asset pools by March 2026.
2. Defined contribution schemes, currently worth £800bn and covering millions of private and public sector workers, will also be consolidated.

By 2030, there should be more than 20 pension funds worth over £25bn. Currently, there are just 10.

The Treasury says this new approach will deliver more than £50bn of new investment in UK infrastructure, new homes and businesses, while it’s estimated that a UK worker on an average income could see a £6,000 boost to their defined contribution pension pot.

What should you do now?

With so many investment options available to you, it can be hard to know the best place to put your money in order to secure the best return upon retirement.

Here at Warr & Co we have decades of experience in managing the pensions of our clients in the most tax-efficient way that maximises return on investment. We can help you by identifying the best investment products to secure your future well into retirement.

It doesn’t matter whether you’re years away from retirement age or fast approaching it, our expert team will ensure you maximise your investment portfolio and give you genuine peace of mind.

Ready to find out more? Request your pension planning consultation now.