Stay informed with free updates
Simply sign up to the Pensions industry myFT Digest — delivered directly to your inbox.
Pension funds in the UK are vocally resisting the government’s call for them to invest up to £50bn in projects and businesses to stimulate economic growth, citing the country’s unattractive investment climate as a deterrent.
Executives from the £1.3tn pension fund sector, who gathered at a conference in Manchester, expressed concerns about various obstacles that hinder their ability to contribute to the government’s growth agenda in light of public finance pressures.
These challenges range from a lack of suitable investment opportunities to worries about the high-risk nature of the areas the government wants funds to inject their money into.
Nest, the state-backed workplace pension fund managing £33bn in assets, voiced its reluctance to expand its UK investments into early-stage companies, despite their potential for higher returns, due to the increased risks involved.
“We prefer proven business models,” stated Elizabeth Fernando, Nest’s chief investment officer, during the Pensions and Lifetime Savings Association (PLSA) conference.
In July, nine of the UK’s largest workplace pension schemes committed to allocating at least 5% of their “default” fund assets to areas that could facilitate UK growth, such as start-ups, infrastructure, and assets supporting the green transition.
The government believes that this agreement, known as the Mansion House agreement, brokered by the City of London Corporation, could attract up to £50bn in pension capital by 2030 if other UK pension funds follow suit.
The British Telecom Pension Scheme, one of the UK’s largest private sector defined benefit schemes, managing £47bn in assets with 270,000 members, suggested that the government needs to do more to attract retirement funds.
“We are compelled to invest globally,” stated Morten Nilsson, CEO of Brightwell, which manages the scheme’s investments.
“The government has a real opportunity to facilitate investors like us who have a slightly lower risk appetite. We have substantial capital to deploy,” he added.
The PLSA, representing the workplace pension sector, proposes several incentives that the government could offer to attract pension funds, such as tax-free dividends on investments in UK companies and additional tax breaks for UK start-ups and companies requiring late-stage growth capital.
The PLSA also insists that the government ensures a steady flow of “high-quality” investment assets that meet the needs of pension funds.
When asked if the government would consider additional tax incentives to encourage pension investments in UK growth areas, Andrew Griffith, economic secretary to the Treasury, responded that “nothing was off the table.”
However, he added, “A responsible government should not be reckless with public funds. There is definitely a balance when it comes to providing excessive incentives.”
He concluded by stating that everyone should have confidence in the UK economy, as it is a robust and exceptional destination for capital.
Chancellor Jeremy Hunt is expected to address the proposal to unlock pension capital for UK growth in his Autumn Statement in November.
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.
