Britain says change in pension funds needed to improve returns

Britain’s Chancellor of the Exchequer Jeremy Hunt leaves Downing Street in London, Britain September 13, 2023. REUTERS/Toby Melville/File photo acquire license rights

LONDON, Oct 25 (Reuters) – Britain will not force pension funds to consolidate or invest in high-growth companies, but changes must be made to the sector to offer retirees better long-term returns term, Finance Minister Jeremy Hunt said on Wednesday.

Hunt launched the Mansion House Compact in July to help channel cash from direct contribution pension funds to unlisted companies to boost UK economic growth.

The government wants to persuade pension schemes to invest part of their funds in infrastructure as well as startups and green technologies.

Ten companies have now voluntarily committed to investing 5% of their pension funds, around £50 billion in total, in unlisted companies by 2030.

Additionally, the consolidation of pension funds is seen as key to giving them the size and expertise to invest in growing companies without being overly exposed to risky investments.

“I think we have too many pension funds in this country, and I want to see an industry where we end up with fewer funds, but bigger ones,” Hunt said at an event to take stock of the pension fund. ‘initiative. He said he wanted to see larger funds have the confidence to invest in growing companies.

“I don’t think we should be dictating how people do this. I want to give people options…but make it clear that no change is not an option,” Hunt said.

Insurance broker Aon became the tenth member of the pact on Wednesday.

The British Private Equity & Venture Capital Association (BVCA) also announced that 20 companies will help pension funds invest cash in venture, growth and other private capital funds, helping to give small pension funds, in particular, have the expertise to invest, Hunt said.

Hunt said he would take stock of other initiatives to remove barriers to pension investment in his autumn statement on November 22, including a government-backed “vehicle” for investment currently being considered by the British Business Bank as an alternative to pension merger. .

Nausicaa Delfas, head of the pensions regulator, said she supported consolidation and measures to diversify portfolios, with new guidance for schemes expected at the end of the year on investment in private markets.

Delfas said fewer, bigger and well-managed schemes were needed, and it was time to consolidate pension funds which lack the expertise, size and appetite to deliver better returns to savers in funds that have them.

Reporting by Huw Jones; Editing by Sachin Ravikumar and Jane Merriman

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