The U.K. is poised to consolidate multiple pension funds into large "megafunds," potentially unlocking £80 billion ($100 billion) for investments aimed at stimulating economic growth.

British Treasury Chief Rachel Reeves is expected to announce the reform in her upcoming Mansion House speech to finance leaders in London, describing it as the "most significant pension reform in decades."

The proposal would merge 86 local authority pension funds across England and Wales, following successful models in Australia and Canada, where larger pension funds have leveraged their size to drive growth through diverse investments. By 2030, the new Local Government Pension Scheme is projected to manage approximately £500 billion in assets.

The Labour government plans to introduce legislation next year to support this consolidation, which has received bipartisan support. The pensions industry has also shown positive response, with Zoe Alexander, director of policy and advocacy at the Pensions and Lifetime Savings Association, stating that larger pension schemes offer benefits like economies of scale, stronger governance, and enhanced negotiating power.

However, business leaders are urging the government to rebuild trust with the business community after recent tax increases. Louise Hellem, chief economist at the Confederation of British Industry, emphasized the need for a thriving economy to maximize the benefits of these pension reforms.

This initiative comes as the U.K. grapples with slow economic growth since the 2008 financial crisis. The government's focus is on revitalizing the economy, with recent data expected to show minimal growth in the second quarter of this year.