The UK’s largest long-term retirement and savings business has drawn up plans for a new superfund that will support fast-growing businesses as a boost to Jeremy Hunt.
Phoenix, the company that owns Standard Life, has begun creating a multi-billion-pound vehicle for investment. Insiders believe this will boost investment in high growth sectors and increase pension returns.
This includes investing in fintech and life sciences businesses as well as injecting venture capital for long-term into unlisted UK companies.
The fund is also expected to be launched this year. It will help the FTSE100 company meet its goal to invest at least 5pc in its defined contribution (DC), workplace pension assets by 2030.
Phoenix has 12 million customers and over £280bn in total assets that it manages. However, less than 1% of its cash is currently invested into these assets.
The Chancellor’s Mansion House Reforms announced last summer require billions more pounds to be invested in science and technology, for example, over the next five-year period.
By contributing to this investment vehicle, thousands of smaller pension funds will be able to access venture capital and high growth companies.
Venture capital firms charge higher fees, so smaller funds do not typically have the financial power to invest in these ventures.
By transferring cash to the Phoenix Fund, even the smallest pension scheme in Britain, which has 27,000 schemes, could have access to the investments.
The idea was partly inspired by investment funds similar to IFM, which specialises infrastructure investments.
Mr Hunt announced that he wanted to increase returns for savers, while also directing more money towards productive assets with higher returns. This was first announced last year in the Mansion House Speech.
He said that the reforms would increase individual pension pots up to £1,000.
Some pension funds have openly warned the Chancellor that a UK-based mandate could lower investor returns.
Phoenix has been said to aim for around 40% of UK-focused investments as part of the Mansion House commitment. However, sources have suggested that this is not a goal and that the focus will be on returns rather than location.
As part of an investment push into private markets worth £2bn, Britain’s largest pension scheme for local governments is believed to also be planning a UK-focused new fund.
Border to Coast will invest hundreds millions of pounds from the pension pots managed by local government employees in Bedfordshire to Teesside over the next 12 months into UK infrastructure, Private Equity and Private Credit. The “UK Opportunities Fund” will focus on British assets.
Border to Coast, the UK’s largest local government pension scheme with assets of just under 60 billion pounds sterling, is the UK’s largest local government pension fund. The new UK Opportunities Fund will focus on projects such as housing, renewable energy and transport, which, according to money managers, would benefit UK communities.
In an effort to encourage more domestic investment, the Chancellor used his Budget of March to require asset funds to reveal how much money saved by savers is invested in Britain.
The plans will also prevent funds with poor performance from taking on any new business from workplace pension schemes.
Andy Briggs of Phoenix has warned before that British pensioners do not save enough for retirement.
The Government is believed to want to increase the mandatory savings into pensions through workplace schemes from 10pc to 12pc. However, it has not yet held consultations on this proposal.
Mr Briggs said previously: “The State Pension just can’t cope with the way it was designed originally.”
“The state pensions will be paid later, at a lower rate, and the people will have to make more personal provision.”
Phoenix’s spokesperson declined to comment.