Chancellor Rachel Reeves has been busy exploring ways pension funds can help boost the UK economy since taking up her position. Earlier this month Reeves announced her intention to replicate the “Canadian model” to “fire up” the UK economy.
Local Pensions Partnership Investments (LPPI) and the Pension Insurance Corporation (PIC) disagreed on how much this could unlock. The PIC has suggested that reforming local government pensions could unlock £40bn for infrastructure investment, while LPPI’s analysis suggests only a £16bn pot.
However, whatever the size of the pot, commentators warned that while there is potential for the model to unlock capital within Local Government Pension Scheme (LGPS) funds, it “won’t be easy”.
LPPI’s chief investment officer Richard Tomlinson said that if the chancellor is serious about increasing the flow of pension fund capital to the UK more broadly “we must also see a concerted effort to break down barriers to invest”.
He pointed out that currently, execution and regulatory risks all too often slow down or deter investors.
Making growth assets more investable
With the government looking to reinvigorate the UK and stimulate growth, the Pensions and Lifetime Savings Association (PLSA) has put forward several recommendations to create the necessary investment conditions for pension schemes to allocate a greater portion of their assets to growth areas.
This included a number of recommendations for trustees and pension funds, such as developing strategies that consider how to allocate to private markets appropriately to meet the needs of schemes and their future liabilities, and encourage advisers and consultants to further consider growth assets in investment strategies put forward for defined benefit and defined contribution (DC) schemes.
Co-investment route to investing in UK growth
Sticking with UK growth agenda, Future Planet Capital has this month launched a British Co-Investment Fund to offer UK pension schemes a “new and innovative” route to invest in private high-growth UK companies.
The fund will allow pension scheme managers to allocate capital to UK venture investment across the whole of the UK, with the potential for higher long-term returns for savers and deliver one of the few routes for corporate, LGPS and DC pension schemes to support some of the UK’s most significant fast-growing, privately held businesses, in a direct response to government calls to unlock pension capital to invest in UK private markets.
The fund will aim to direct up to £1bn of pension investment into these companies.
Value for Money framework consultation
The Pensions Regulator (TPR), Financial Conduct Authority (FCA) and the Department for Work and Pensions (DWP) are working in partnership to develop a framework to improve the value schemes deliver for savers and enabling comparisons to be made across the DC pension landscape, including contract-based and trust-based schemes.
Earlier this month, the FCA launched a consultation on the Value for Money Framework for contract-based schemes, ahead of DWP introducing equivalent legislation for trust-based schemes in an upcoming Pension Schemes Bill.
Under the proposals, pension schemes will be required to publish and be compared on metrics that demonstrate value, including on investment performance, costs and charges, and service quality.
The FCA said that transparency will drive better competition, focused on true long-term value rather than short-term cost.
Items to note:
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Pamela Kokoszka
UK Correspondent
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