Chancellor Rachel Reeves has confirmed plans to merge local government pension schemes into ‘megafunds' to drive economic growth.

The reforms, which will be introduced through a new Pension Schemes Bill next year, will pool assets from the 86 separate local government pension schemes (LGPS) in England and Wales.

Together the LGPS represent one of the world's largest defined-benefit schemes, with 6.5 million members and £360bn in assets.

Pensions minister Emma Reynolds said the reforms could unlock £80bn of investment into new businesses and critical infrastructure.

In her Mansion House speech today, the chancellor will say the move would ‘boost people's savings in retirement and drive economic growth so we can make every part of Britain better off.'

In 2015, the former Conservative prime minister David Cameron tried to push local funds into eight larger pools, but to date only around 39% of LGPS assets have been merged into larger funds.

Labour's reforms include plans to have each administering authority specify targets for investment in their local economies. The Treasury claims that a 5% target for local investment could secure £20bn for communities.

A new independent review process will also be established to ensure each of the 86 administering authorities is ‘fit for purpose.'