Reform vows to overhaul pension schemes for new local government workers

A Reform government would end more generous defined benefit pension schemes for new local government workers and merge nearly 100 separate schemes to create a £500bn British Sovereign Wealth Fund.

The new fund would increase investments in UK companies, products, housing and infrastructure by £100bn according to Richard Tice, head of Reform's proposed new Department of Business Trade and Energy.

In a speech on Tuesday, Tice vowedto ditch the government's environmental targets and scrap new employment rights including protections around sick pay and unfair dismissal.

Labour said Reform had "formally declared war on British workers" with its plans to wind back workers' rights.

Tice said the public sector should have a "relentless focus on buying British", and that the new proposed fund would pursue the national interest by investing in defence, steel and energy.

He said it was "our patriotic duty to use our energy treasures", including energy resources in the North Sea.

Unlike state pensions, which are paid out of general taxation, local governments and their workers pay into schemes that guarantee a level of income in retirement, often linked to final or average salaries.

There are nearly 100 of these "defined benefit" local government pension schemes across the UK with more than 7 million members or pensioners and over £400bn in assets.

But Tice said the current schemes were "underperforming hugely", had "no coordination" and were investing in "woke nonsense".

Reform plans to bar any new entrants to the current schemes and, like most of the private sector, enrol new employees into defined contribution schemes. In those schemes payout is not guaranteed, but instead depends on contributions made by the employee and employer, and gains (or losses) from market investments.

Tice said the current system could be transformed into "a British sovereign wealth fund... patriotically backing Britain", that was "akin" to the success of the London stock market.

When this idea was first floated last November, the public sector union Prospect described it as "a baseless attack on public servants" which would "only worsen the current recruitment and retention crisis in our public services, and would plunge the services people rely on into staffing chaos".

Jon Richards, assistant general secretary of the public service union Unison, said those in charge of Reform were not on the side of working people.

"Forcing council staff on to inferior pensions would leave retired workers poorer and worsen an already severe recruitment crisis for local government," he said.

Reform officials confirmed these changes were now party policy.

Reform plans to force schemes to invest a much larger portion of the accumulated assets of the existing defined benefits schemes in British companies and products to boost economic growth.

Tice and Reform leader Nigel Farage both pointed to British Steel, which they said would be revived under their plans. The firm has been beset by financial issues spanning years.

The allocation of UK pension savings invested in UK companies has fallen from about 40% two decades ago to below 4% as pension fund trustees have chosen to invest in safer assets like government bonds or shares with historically higher returns in other markets.

Reform claims its plans to increase the new fund's investment in UK shares to 25% of the total would see an extra £100bn investment in UK-listed shares.

The government has also set out intentions to merge dozens of local government schemes into a few large funds but has no current plans to end the guaranteed nature of the existing defined benefit plans.

The government also hopes to encourage more pension investment in UK markets but proposals to mandate or force pension funds to invest more in domestic markets have drawn criticism from pension providers and the governor of the Bank of England.

Andrew Bailey told reporters last summer: "I do not support mandating, I don't think that's appropriate."

Returns on investments in UK shares have been well below the returns seen on investments in US shares over the last 20 years, but have performed better so far this year.

In his speech, Tice calledthe government's new employment rights rules "daft regulations" that would hinder economic growth.

He also criticised the government's environmental policies saying that a Reform government would maximise production of "every last barrel" of UK oil and gas.

A Labour Party spokesperson said: "Nigel Farage and his cronies want to rip up hard-won workers' rights on parental leave, sick pay, and would cut up to a million clean energy jobs in the process."

Tice said recent reforms in renters' rights were "reducing supply of properties to rent and therefore increasing prices".

Farage said many landlords were frustrated that now "it's too risky" to remove a tenant if they want to sell the property. He said the sovereign wealth funds would increase investment in housing.

Pensions expert John Ralfe told the BBC that comparisons of Reform's proposed new fund with sovereign wealth funds in countries such as Norway and the Gulf states were wide of the mark.

"Reform forgets that local government pension schemes have made promises to members to pay guaranteed inflation-linked pensions over many years," he said.

"That's a crucial difference with other sovereign wealth funds which have no promises to pay. They are just a bunch of assets, usually from oil revenues, with no liabilities to meet."

Shadow chancellor Sir Mel Stride said Reform's plans would not fix the economy.

"Rebranding a government pension scheme does not make a sovereign wealth fund. Reform talk of being the next Singapore but the substance simply isn't there," he said.

Additional reporting by Faarea Masud.