The UK government has laid out proposals designed to unlock tens of billions of pounds from pension funds to invest in start-ups and high-growth companies.
In his annual Mansion House speech, chancellor Jeremy Hunt outlined his plans to make the UK capital markets more attractive.
Hunt says that a voluntary compact by some of Britain’s biggest pension companies - including Aviva, Legal & General, Phoenix and Scottish Widows - to commit five per cent of their investments to private equity and early-stage businesses will unlock up to £50 billion in funding for start-ups and SMEs by 2030.
Says Hunt: “British pensioners should benefit from British business success. By unlocking investment, we will boost retirement income by over £1,000 a year for typical earner over the course of their career.
“This also means more investment in our most promising companies, driving growth in the UK.”
Louis Taylor, CEO, British Business Bank, says she "fully supports the Chancellor’s request to explore establishing a vehicle that could receive third party capital such as pension fund investment".
Others are unimpressed by the proposals. James Baxter, founder of wealth management firm Tideway Wealth, says Hunt’s plan addresses only a tiny proportion of the UK pensions market and ignores the majority of DC schemes and the entirety of the DB market, not to mention public sector schemes.
"The overall UK pensions market is worth c.£2.5tn, of which £50bn [Hunt’s target] is a meagre portion," he says. "It’s a step forward, but only a very small one. If we want to do right by those saving for their retirements, and encourage sufficient investment into UK companies and infrastructure, we need to be more ambitious and more realistic about the effort and scale required of such an initiative in order to make a real difference.”
The government has also launched an independent review into the future of payments - led by Joe Garner, former CEO of Nationwide Building Society - to help deliver the next generation of retail payments, including looking at mobile payments.
In addition, Hunt is planning reforms to simplify rules for buying and selling shares and to boost the amount of stockbroker research on listed companies.
Meanwhile, the government wants to make share certificates in public companies fully digital in order to make it simpler and cheaper for companies to manage their share registers.
In a related development, the Lord Mayor of London, Nicholas Lyons, has introduced the Mansion House Compact in order to encourage more long term capital into UK growth companies to improve the retirement incomes of UK savers by encouraging pension schemes to increase their allocation to unlisted equities, including venture capital and private equity.
Will Wynne and Andrew Evans, co-founders of Smart, which has signed on to the compact, say: "It's excellent to see initiatives like this, encouraging the market to create more innovative high-growth UK companies, and in doing so to provide a better retirement for the country’s savers."