One way forward she has raised previously would be to mandate a certain percentage of investment by pension funds into UK productive finance.
This is contentious, potentially infringes on fiduciary duty, and will, I suspect, be kept as a last resort. She might be able to persuade the funds to change the 5pc Mansion House Commitment to, say, 10pc, and do it earlier. But I very much doubt it.
So how best to incentivise without compromising trustees’ fiduciary duty? I suspect she will use tax penalties to drive behaviour.
First, she could address the 25pc tax-free lump sum (currently capped at £268,275). Some Left-wing commentators have argued that a reduction in the sum is needed, down to between £50,000 and £100,000, arguing this will penalise those with the broadest shoulders (or the biggest pension savings, in this case). It also saves the Treasury money by expanding the tax envelope.
A sweetener from HMT would be to say that anyone seeking to withdraw their 25pc would still get it tax-free, provided a sufficiently high percentage of the remaining fund is invested in productive finance. You could still withdraw your 25pc, if you did not want to invest in UK productive finance, but you would be subject to tax.
In effect, the tax break would become linked to investing your pension savings into British industry.
Second, she will probably make pensions subject to inheritance tax. At first blush this raises £2bn. The HMT sweetener to this would be that if the pension is invested in UK productive finance to a sufficiently large degree, then the inheritance tax change would not kick in. Avoiding a 40pc tax is a strong motivator.
Finally, she could look at Isas: if your Isa fund does not have, say, 20pc invested in UK productive assets then it could be subject to significant taxes on sale. Again, you can ignore this, but you would face taxes for not investing in Britain sufficiently.
She will need to create proper infrastructure bonds for pension schemes that are attractive in terms of risk and return. Frankly, it is the only way she will get the finance to invest in nuclear.
There are other material changes that need to be made that are not tax related but which will drive change: firstly, end daily reporting for defined contribution funds. It stifles investment by focusing the mind on volatility, rather than long-term performance.
Second, take away the powers of the FCA over pensions and give it to the Pensions Regulator. It is crazy that we have two regulators trying to run one industry. And, having been the minister, it is very clear that pensions are a sideshow to the FCA.
And finally, do proper value for money performance league tables, using as a base the league tables and the heat maps they have in Australia. This forces managers to invest for better performance.
I would also incentivise investment through policies such as dividend tax relief, which was taken away by Gordon Brown in 1997, but I fear that this is not a Chancellor who will want to create positive incentives.
Guy Opperman was the minister for pensions and financial inclusion from 2017 to 2022