Chancellor Rachel Reeves has unveiled radical pension reforms which will create megafunds through consolidating defined contribution schemes and pooling assets from the 86 separate Local Government Pension Scheme authorities.

The megafunds mirror set-ups in Australia and Canada – where pension funds take advantage of size to invest in assets that have higher growth potential – and could deliver around £80bn of UK investment.

Public sector pension funds are currently run by nearly 100 different authorities made up of local government officials and councillors.

Consolidating the assets into a handful of megafunds run by professional fund managers will allow them to invest more in larger projects like infrastructure.

Reeves said: “Last month’s Budget fixed the foundations to restore economic stability and put our public services on a firmer footing. Now we’re going for growth.

“That starts with the biggest set of reforms to the pensions market in decades to unlock tens of billions of pounds of investment in business and infrastructure, boost people’s savings in retirement and drive economic growth so we can make every part of Britain better off.

Pensions Minister, Emma Reynolds added: ‘Harnessing the power of this multi-billion-pound industry is a win-win, benefiting future pensioners, and our wider economy.

‘These reforms could unlock £80 billion of investment into exciting new businesses and critical infrastructure.”