ICAEW urges Chancellor to prioritise pension reforms for economic growth

The Institute of Chartered Accountants in England and Wales (ICAEW) has urged the UK’s Chancellor of the Exchequer Rachel Reeves to prioritise pension reforms to unlock the £3trn ($4.04trn) potential held by pension funds.

Ahead of the Chancellor’s Mansion House speech this week, ICAEW emphasised the significant economic impact of these funds compared to the relatively minor £300bn held in cash Individual Savings Accounts (ISAs).

ICAEW highlighted that focusing on cash ISAs would not significantly contribute to economic growth.

The institute welcomed the shift away from this focus but stressed that any reserve powers to mandate asset allocation should include strict transparency, oversight, and safeguards to mitigate risks, especially in higher-risk or less liquid asset classes.

ICAEW chief executive Alan Vallance said: “A year after the general election, growth remains the government’s most pressing mission and we hope the Chancellor will use her Mansion House speech as an opportunity to reduce the regulatory burden on financial services.

“In our view, a change to cash ISAs would have been misplaced, and instead a focus on improving conditions for the much greater funds held by institutions would yield the most benefit to UK plc.

“Cash deposits by individual savers support mortgage lending, and a limit to that supply would raise the cost of capital for building societies, resulting in higher mortgage rates and higher inflation.”

ICAEW also pointed out that the current regulatory burden is hindering innovation and growth.

It called for more proportionate, transparent, and forward-looking regulatory regimes to boost the economy.

This includes implementing the reformed UK prospectus regime to streamline capital access and increasing private capital mobilisation with appropriate protections.

ICAEW expects the government’s upcoming financial services sector plan to outline concrete steps to reduce regulatory costs for businesses by 25%.

The plan should also address inefficiencies, eliminate duplication, and streamline data collection to enhance competition in UK capital markets, thereby encouraging listings and risk-taking.

Vallance added: “Meanwhile, a concrete plan to cut the cost of red tape by a quarter and to ensure regulation is proportionate, transparent and forward-looking will help reduce the burden on business.

“It is vital that the Chancellor uses her speech on Tuesday to outline measures to boost flows from both institutional and private investors back into the UK’s capital markets and remind global business why London is the world’s top financial centre.”