The Chancellor hopes to boost pension pots by £11,000 and unlock billions more in investment with a review of retirement savings.
With pension schemes expected to manage about £800 billion by 2030, the review will look at how they can be encouraged to invest in productive assets such as infrastructure.
As well as supporting the Government’s aim of boosting economic growth, the Treasury said this would also ensure better returns for savers, increasing the average pension pot by more than £11,000.
The announcement follows the inclusion of a Pension Schemes Bill in Wednesday’s King’s Speech, to help savers by introducing automatic consolidation of small pension pots and a value-for-money framework to improve governance.
Rachel Reeves said: “Despite a very challenging inheritance, this new Government is getting on with the job of delivering our mandate to get the economy growing so we can make every part of our country better off.
There is so much untapped potential in our pensions markets, with an industry worth around £2 trillion
“The review we are announcing is the latest in a big bang of reforms to unlock growth, boost investment and deliver savings for pensioners.
“There is no time to waste. That is why I am determined to fix the foundations of our economy so we can rebuild Britain and improve people’s lives.”
The review will be led by new pensions minister Emma Reynolds, the first to work jointly with the Treasury and the Department for Work and Pensions.
Ms Reeves and Ms Reynolds will chair a meeting with the pensions industry on Monday to discuss the review, before the Chancellor chairs the first “Growth Mission Board” on Tuesday focused on the Government’s mission to secure the highest sustained growth in the G7.
Other measures being considered by the Government include further consolidation of the Local Government Pension Scheme (LGPS) for England and Wales, which is currently split across 87 funds and pays £2 billion a year in fees alone.
Ms Reynolds said: “Over the next few months the review will focus on identifying any further actions to drive investment that could be taken forward in the Pension Schemes Bill before then exploring long-term challenges to ensure our pensions system is fit for the future.
“There is so much untapped potential in our pensions markets, with an industry worth around £2 trillion.
“The measures we have already set out in our Pension Schemes Bill will help drive higher investment and a better deal for our future pensioners.”
Not only is the current system not delivering the retirement savings it should, but it is not doing what it should to support some of our great British businesses
The announcement of the review has been welcomed by the pensions sector.
Andrea Rossi, chief executive of investment firm M&G, said the review was “long overdue”, adding: “Consolidation, combined with the role of advice, has huge potential to align the interests of savers with the UK’s growth ambition.
“We look forward to supporting the Government on this landmark review.”
Barclays’ chief executive CS Venkatakrishnan said: “Pensions reforms are critical to unlocking institutional investment in growth equity and, alongside a streamlining of listing requirements, will give a significant boost to UK capital markets and growth.”
The previous government also targeted pension schemes as a potential way of unlocking investment in British businesses and infrastructure schemes, and then-chancellor Jeremy Hunt announced a series of value-for-money reforms in March.
Writing in the Mail on Sunday, Ms Reeves said the Conservatives had “promised action” to reform pensions, but “failed to deliver” over 14 years in office.
She said: “Not only is the current system not delivering the retirement savings it should, but it is not doing what it should to support some of our great British businesses.”
The Chancellor added: “Where they have failed, I will act.”
