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Prime Minister Jeremy Hunt is set to outline a broad plan in a speech at Mansion House next month to channel billions of pounds worth of British pension investment into fast-growing British companies, aimed at boosting economic growth.
Options set out in government consultations include encouraging UK pension funds to invest more in high-risk but potentially high-growth UK assets, including early-stage companies, and highly disaggregated; It will include regulatory changes to encourage further integration in the country’s unified pension market, he said. Whitehall insider.
They said Mr Hunt followed a proposal from consultancy Tony Blair Institute to pool tens of thousands of public and private sector pension schemes into a “GB Superfund” that would invest in UK start-ups, infrastructure and other companies. “We are considering it carefully,” he added.
As Britain struggles with persistently high inflation, Hunt wants to plan reforms to put the country on a faster growth trajectory.
In a speech at the Mansion House in front of city officials in July, the prime minister said he would revise the investment range held by the UK pension system, which manages about £3 trillion in assets, according to Whitehall insiders. It will outline proposals aimed at diversification, with UK funds seen as too risk-averse. To our international friends.
The final version of Mr. Hunt’s plan, which will cover defined benefit, defined contribution, and municipal pension plans with tens of millions of members, is expected to be unveiled in a statement in the fall.
Hunt isn’t proposing to require pension fund trustees to decide where to put their money.
Instead, Hunt sees his reforms as an attempt to ensure that UK pensioners benefit from high returns from investing in risky assets such as start-ups, infrastructure and private equity. We plan to set up a framework as This is the approach taken by large retirement plans in Canada and Australia.
The Treasury said: “There is an opportunity to boost returns for UK pensioners by increasing investment in the UK’s highest growth areas, as the Treasurer has said in the Budget.”
“This will bring billions of dollars to our cutting-edge business and ensure we have access to the capital we need to scale and go public in the UK.”
Hunt’s plan comes amid growing concerns that British companies are increasingly leaning toward foreign capital, partly due to underinvestment by British pension funds.
Some high-profile companies, such as Cambridge-based chip designer Arm, chose New York to avoid listing on the London Stock Exchange.
Since 2008, the share of British stocks held by defined benefit funds that promise savers a secure pension based on salary and years of service has fallen from around 50% to less than 10%. Over the same period, his bond holdings rose from one-third to over 70 percent.
In recent weeks, government officials have warned that employers with defined benefit plans have accumulated surpluses in retirement benefits through investments in high-risk assets such as start-ups and green transition-focused infrastructure. have considered proposals to make it more readily available.
The fund’s surplus could be used by employers to invest in businesses or increase pension payments.
Sir Steve Webb, a former pensions minister who submitted the surplus proposal to the Treasury, said: “Current regulations have created a situation where many defined benefit schemes are forced into excessively low-risk, low-return investment strategies. We are thinking,” he said. .
Hunt is also looking at ways to stimulate private equity and venture capital investment by defined-contribution plans, which don’t offer retirement-level promises to savers.
The government talks are not expected to include proposed changes to accounting rules that have caused defined benefit plans to shift from equities to bonds.
Nigel People, director of policy and advocacy for the Pensions and Lifetime Savings Association, the industry group representing workplace pensions, said: “In recent weeks, there has been a very radical outcry from various think tanks on pension consolidation and risk-taking. We have some proposals,” he said. Funds that serve 30 million savers.
“Many of these do not take into account the realities of pension savings and the operational aspects that can be achieved.