The Investment Association (IA), the UK funds trade body, has called on the government to increase pension contributions across occupational DC schemes and make UK capital markets more efficient.
The calls are among a series of proposals in response the the UK government’s Pension Review.
Better retirement outcomes for the millions of UK pension scheme members, and support for economic growth, would result from the IA’s recommendations, the trade body said.
UK investment managers look after £2.2 trillion directly for UK pension schemes.
“By implementing clearly targeted reforms and improving the attractiveness of UK capital markets for all investors, both domestic and international, investment managers believe that government can build a new consensus to achieve its growth objectives without having to mandate or direct pension capital,” the IA said.
Among ten recommendations for the UK pensions market are a focus on ‘sophisticated scale’, whereby governance and accountability are given similar importance to size as a factor in successful pensions management.
There also needs to be a cultural change that places long-term outcomes over price when defining value. This would require a “shift in mindset” and a greater focus on the operational issues that are complicating investment allocations, notably daily dealing mechanisms which inhibit access to less liquid or illiquid asset classes.
The Government needs to address frictions and disincentives in the UK capital markets, said the IA, that could make UK capital markets more competitive and innovative. This includes the abolition of stamp duty on UK listed equities.
Jonathan Lipkin, director, policy, strategy and innovation at the IA, said: “Our recommendations outline how a focus on sophisticated scale, a pivot from cost to a wider consideration of long-term value, and greater access to more diversified investments, can help achieve better retirement outcomes.
“While pension reform – including higher aggregate contribution levels – can help to create a different dynamic for UK investment, our recommendations emphasise the importance of a broader approach to make the UK more attractive for both domestic and international investors. The investment management industry is fully committed to help drive the process forward, and we welcome the opportunity to engage with government and policymakers.”
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