British pension funds must improve their performance to provide better long-term returns for pensioners, but the government will not force funds to invest in high-growth companies, Chancellor Jeremy Hunt has said.
The government wants to persuade pension funds to invest some of their money in infrastructure, as well as start-ups and green technologies.
At a pensions summit, he said the government would not force pension funds to invest in high-growth companies, but stressed the sector needed to change.
Ministers want pension funds to go where they can boost UK economic growth.
Ten companies have voluntarily committed to investing around £50 billion, or about 5 percent of their assets, in tech start-ups and other unlisted companies by 2030.
The Chancellor said further initiatives to remove barriers to pension investment will be unveiled in next month’s Autumn Statement, including a government-backed investment “facility” currently being considered by the British Business Bank as an alternative to pension fund mergers.
His speech came after it emerged that the pension fund, which looks after the pensions of British MPs and ministers, had done the opposite of what the Chancellor wants for British pensions.
The Parliamentary Pension Fund invests just 1.7 per cent of its fund in listed UK companies, or 2.8 per cent of total listed shares, much less than the average for UK defined benefit schemes. Financial times reported.
As of March 2022, the Parliamentary Pension Fund had 59.8 percent of its total assets of £835 million invested in non-UK listed shares, compared to 1.7 percent in UK listed companies.
UK private sector pension schemes accounted for 12.6 per cent of listed equity investments in UK companies in 2022, the data shows.
Nausicaä Delphas, the pensions regulator, said at the summit that the regulator would not tell pension funds how to invest, but stressed that trustees had a “duty to act in the best interests of savers”.
“This means we must work hard to ensure the retirement income we expect, including carefully considering all investment options,” she said.
She said the regulator would encourage more pension funds to consolidate “towards fewer, larger and well-managed schemes” that can invest in a wide range of assets.
“Where systems lack the scale, experience or desire to deliver real results for savers, now is the time to consolidate their savers and move them to a system that can do this.” Savers deserve nothing less,” she added.
The regulator wanted investments to be diversified, made with due care and attention, and provide better services at a fair price.
She said the regulator needed more high-quality trustees “who are willing to challenge advisers to do better and ensure all savers get the most from their pensions”.
Source: I News
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