The UK will launch its own equivalent of France’s ‘Tibi’ investment fund to encourage pension funds to invest in domestic companies if the Labour Party takes power at the next General Election.
Publishing its Plan for Financial Services, Labour says it will establish a British ‘Tibi’ investment fund to help DC pension schemes invest in UK growth assets – if the party wins the next General Election.
The UK must have a General Election by January 2025, but is expected to go to the polls in autumn 2024.
The latest Ipsos opinion poll, published earlier this week, points to a landslide Labour victory, with 49% of voters intending to vote Labour, compared to 27% for the incumbent Conservatives and 7% for the Liberal Democrats.
The British Tibi fund will be based on the model of the French Tibi fund which launched in 2019, bringing pledges of €5 billion of institutional investment into tech companies by 2022. It will target venture capital and UK small cap funds, supported by British Patient Capital.
Labour says it will use the Tibi scheme to bring venture capital and institutional investors together to workshop “innovative DC-centric fee structures” and convene DC funds with infrastructure investors. The scheme will explore how to improve the credibility of policy stability, which is currently a barrier to higher levels of UK infrastructure investment.
The French government says phase 1 of the Tibi initiative has made France the leading ecosystem for financing new technologies in the European Union.
Labour’s shadow Chancellor Rachel Reeves has also said she will launch a pensions review, give The Pensions Regulator (TPR) new powers to force consolidation of pension schemes and work with local government pension schemes to develop in-house fund management capabilities within pools to boost returns and create jobs in the regions.
Labour’s planned pensions review will cover defined benefit, defined contribution and public sector schemes, including local government pension schemes, and will engage with corporate sponsors, asset managers and venture capital and private equity managers.
Labour’s policy proposals for the financial services sector echo the Conservative’s Mansion House reforms package, citing low exposure to UK equities in pension funds as a reason for lower returns for pension savers, even though DC schemes – the only types of scheme where individual investors are personally impacted by the investment returns delivered – have very high, sometimes 100%.
Jeremy Hunt’s sweeping pension and MiFID-II reforms
It also plans to reform Solvency UK to unlock up to £100 billion in capital from insurers to invest in productive assets.
Labour also plans to deliver a modern ‘Tell Sid’ campaign to drive retail share ownership, and will look to simplify the Isa landscape. The Tell Sid campaign promoted individual share ownership of British Gas when the state utility went public in 1986.
It also plans to give TPR new powers to force consolidation where schemes fail to offer sufficient value to members, and will ask TPR to provide explicit guidance around fund and strategy suitability and their expectation of a default cohort investment approach. It will review minimum performance standards for DC schemes.
Shadow Chancellor Rachel Reeves says: “Labour’s defining economic mission is to restore growth to Britain. This calls not just for a change in government, but a change in mindset: an active government prepared to work in partnership with business to remove the barriers to economic success.”
David Brooks, head of policy, Broadstone, says: “It is interesting that the Labour Party is keen to continue the journey of encouraging more investment in long-term illiquid assets such as productive finance.
“The continuity in pensions policy, despite any potential change in government, will please the industry and is to be welcomed. However, scepticism remains around the speed of change required to reach the government’s goals give the pace of consolidation needed as a pre-requisite for releasing the required levels of investment.”
He added: “Labour is proposing stronger regulatory powers to force the wind up of under-performing defined contribution pension schemes. This is an interesting development which could increase the pressure on The Pensions Regulator to become more ‘hands on’ with underperforming schemes.”
