UK to release £50 billion in pension funds to support tech startups

Britain has unveiled a plan to unlock billions of pounds from pension funds for investment in early-stage firms. The move aims to boost economic growth as concerns grow that the UK is losing its appeal as a technology hub.

In a recent speech, UK Finance Minister Jeremy Hunt outlined a series of reforms. He stated that these reforms would increase pensioners’ annual returns by £1,000 ($1,283) by allowing them to benefit from long-term investments in privately-held startups.

One of the measures introduced by the government is an agreement among major pension providers to allocate 5% of their default funds to unlisted equities by 2030. This could potentially unlock up to £50 billion ($64 billion) of investment in high-growth firms if other pension schemes follow suit.

Additionally, Hunt highlighted that defined contribution pension schemes committing to more effective investments could lead to a potential increase of up to 12% in average earners’ pension pots, reaching as much as £16,000.

With a pension market worth over £2.5 trillion, the UK aims to become the world’s next Silicon Valley and a science superpower. Hunt emphasized the importance of embracing new technologies like AI and ensuring the financial services sector has the architecture to provide security for investors and capital for businesses.

Hunt also announced plans for an “intermittent trading venue” that would allow public market investors to trade shares of unlisted firms. This would provide an alternative way for privately-traded firms to raise capital.

These plans come in response to criticisms from key figures in the tech industry who have argued that Britain is losing its appeal as a tech business hub.

Microsoft President Brad Smith expressed concerns that confidence in the UK’s technology sector was severely impacted after regulators blocked the company’s takeover of video game publisher Activision Blizzard. In addition, the CEO of fintech firm Revolut, Nikolay Storonsky, stated that he would never list his company in London due to unfavorable tax policies and bureaucratic regulations.

Furthermore, chip design firm Arm’s decision to list in the US instead of the UK dealt a significant blow to the country’s aspirations of becoming a global hub for big tech IPOs.

Despite these challenges, there is optimism that these reforms will support the UK tech industry. Will Wynne, co-founder of Smart, an online workplace pensions platform, sees this as an opportunity for others to achieve similar success.