The UK Government's new initiative could lead to a £50 billion investment in infrastructure projects, aimed at stimulating the economy and enhancing returns for pension savers.

As part of the Pension Schemes Bill reforms, multi-employer defined contribution schemes and local government pension pools are expected to manage at least £25 billion in assets within five years.

The government plans to double the number of pension megafunds by 2030, which could potentially increase workers' retirement savings by £6,000.

Industry experts, including Zoe Alexander from the Pensions and Lifetime Savings Association, believe these changes could significantly enhance pension schemes while improving retirement outcomes through better governance and diversification.

Seventeen major UK pension firms have already agreed to the reforms through a voluntary agreement, although legislation may be introduced if progress is not satisfactory by the end of the decade.

The local government pension scheme will undergo consolidation from 86 administering authorities into six pools, streamlining operations and enhancing efficiency.

This 'megafunds' initiative will consolidate 86 local authority pension schemes, which cover over six million people, into six asset pools by March 2026, allowing for targeted local investments.

Former pensions minister Sir Steve Webb praised the government's bold reforms as a transformative step for pension schemes, indicating that surplus funds could be utilized more effectively for the benefit of scheme members and the economy.

Chancellor Rachel Reeves emphasized that the reforms are designed to improve pension returns while increasing investments in clean energy and high-growth businesses.

The Treasury estimates that these reforms will save £1 billion annually through economies of scale and enhanced investment strategies.

In addition to local authority schemes, defined contribution schemes worth £800 billion will also be consolidated, impacting millions of workers.

Deputy Prime Minister Angela Rayner highlighted the significant potential of the £392 billion local government pension scheme to foster growth and create opportunities across communities in the UK.