The chancellor has warned the pension fund industry that “no change is not an option”, but also has said that he will not force schemes to merge as part of efforts to increase domestic investments in British start-ups.
In July Jeremy Hunt set out plans to unlock £75 billion in UK retirement schemes to back young, high-growth businesses in Britain. By encouraging pension funds to invest in unlisted equities, he hopes to improve the returns enjoyed by retirement scheme members and to boost the economy.
It comes amid worries that start-ups often look overseas for financial backing, meaning that British investors risk losing out on returns if these companies flourish.
The chancellor, speaking at the Mansion House pension summit in the City to discuss his plans, said he would not allow reform to be “dragged into the sand by endless consultations”. He said the policymaking process on a pension industry shake-up would be concluded by the time of his autumn statement.
Aon confirmed yesterday that it would join the Mansion House Compact, a voluntary initiative unveiled in July by nine other leading providers of defined -contribution pension schemes in which they committed themselves to allocating at least 5 per cent of the assets in their default retirement funds to unlisted equities by 2030.
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Another proposal from the government is to find ways to increase the scale of defined-contribution funds, so that they can confidently make higher-risk investments in start-ups. Hunt said “we’ve got far too many pension funds in this country” and Britain needed “fewer, larger funds”.
This could be achieved through mergers or the creation of a vehicle allowing smaller funds to invest side-by-side or through buyout deals, he said, although he was “not thinking we should mandate” how consolidation occurs. “My job is to give people lots of options as to how they get that better value for their pension fund holders, but to make it clear that no change is not an option,” he said.
