Britain’s Major Workplace Pension Providers Vow to Invest More in Local Companies to Stimulate Growth
Keynote speech: Chancellor Jeremy Hunt
Some of the largest workplace pension providers in the UK have committed to investing more capital into domestic companies in an effort to stimulate economic growth.
Aviva and Legal & General are among the pension firms pledging to allocate up to 5% of their assets to ‘unlisted equities,’ including start-ups and private equity, by the end of the decade. This initiative is part of a comprehensive package of reforms to be announced by Chancellor Jeremy Hunt in his keynote Mansion House speech.
During the speech, Hunt will address business leaders and express his aims to increase returns for pensioners, improve investor outcomes, and unlock capital for growth businesses. He will emphasize the government’s commitment to prioritizing the needs of pension savers.
The Chancellor’s plans aim to direct a larger portion of the estimated £3 trillion in pension savings towards start-ups, fintech companies, infrastructure projects, and private equity, with the goal of generating higher returns, especially for younger pension savers. Additionally, Hunt hopes to support the growth of innovative British firms and encourage them to remain in the UK.
The pension providers that have pledged to invest represent more than half of the £700 billion defined contribution (DC) market. Unlike final salary schemes, DC pensions do not guarantee future payouts and place investment risk on the individual rather than the employer. DC pensions have largely replaced final salary pensions due to affordability concerns for most companies.
This commitment comes in the wake of UK tech companies, such as chip designer Arm, choosing to list their shares in New York instead of London. Furthermore, over the past twenty years, UK pension funds have significantly reduced their holdings in UK equities, a trend that Hunt wants to reverse. However, the Chancellor has refrained from mandating specific sector investments, as managers and trustees argue that this would conflict with their fiduciary duties to pension savers.
Despite recent challenges faced by Thames Water and its investors, including the £90 billion Universities Superannuation Scheme, Hunt remains dedicated to his proposals. These proposals are intended to address the relatively small savings accumulated in DC pensions due to lower contribution rates compared to final salary schemes. The government’s objective is to enhance pension pots, particularly for younger savers, by encouraging investment in assets that offer higher long-term
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Denial of responsibility! Vigour Times is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
