Major UK pension providers have agreed to increase their investments in domestic assets through a new pledge set to be launched by Chancellor Jeremy Hunt.
According to an exclusive news report in Funds Europe‘s sister publication, The Corporate Advisor, the pledge, called a “compact” by the Treasury, aims to encourage defined contribution (DC) pension providers to use pension assets for investments in UK businesses. The compact does not specify a mandatory percentage for domestic investments.
Hunt is seeking to direct the £3 trillion in UK pension scheme assets towards start-ups, infrastructure and private equity.
Hunt is expected to set out his plans in his Mansion House speech in the City of London today.
According to the news report, providers are comfortable with the pledge as long as it remains voluntary, while others express concern it may interfere with trustees’ fiduciary duty.
Even though most providers are expected to sign up since no obligations are imposed, at least one provider has refused to participate. Critics have said pushing investments towards UK real assets may fuel an existing sector bubble.
The UK’s Labour Party has proposed plans that could require pension funds to invest in a £50 billion growth fund.
In May, the Tony Blair Institute suggested transforming the Pension Protection Fund into a “superfund” with the aim of increasing investments in the UK economy.
Data shows high equity investments in the £500 billion defined contribution pension sector, with only 8.8% allocated to UK equities.
© 2023 funds europe
