Pension funds have resisted a UK government initiative to invest up £50bn into projects and businesses to support economic development, claiming that the country was not attractive enough for their capital.
The £1.3tn industry executives who attended a conference on Wednesday in Manchester said that funds seeking to support the Government’s growth agenda despite the high pressures on the public finances are facing a number of obstacles.
The reasons for this ranged from the lack of investment opportunities suitable to the government to the concern about the high risk nature of the areas where the government wanted to invest their money.
Nest, a state-sponsored workplace pension fund that manages £33bn, has said it is reluctant to increase its UK investments in early-stage businesses, which have the potential of higher returns, but also carry higher risks.
Elizabeth Fernando, Nest’s chief investment officer told the Pensions and Lifetime Savings Association conference that they wanted to invest in proven business models.
It is to build retirement funds. “Our job is to build retirement fund.”
Nine of the UK’s largest workplace pension schemes have committed to investing at least five per cent of “default” funds assets in areas which could potentially support UK economic growth. These include start-ups, infrastructure, and assets that support the green transformation.
The government believes that this so-called Mansion House Agreement, brokered through the City of London Corporation which operates the Square Mile in London, could unlock £50bn of pension capital by 2030, if other UK Pension Funds follow suit.
British Telecom Pension scheme, a defined benefit pension scheme in the UK, is one of the biggest private sector schemes with assets of £47bn and 270,000 members. It suggests that the government can do more to attract retirement fund.
Morten Nilsson is the chief executive officer of Brightwell which manages investment schemes for Brightwell.
The government has an opportunity to assist people who are less risk averse. He said that we have a lot of money available to invest.
The PLSA represents the workplace pensions sector and believes that the government can offer incentives such as tax-free dividends for pension funds investing in UK companies. The PLSA also wants to see additional tax incentives for UK start-ups, and companies that require late-stage capital growth. For example, the Lifts Initiative which applies to science-and-tech investments.
The PLSA called on the government to provide a steady stream of “high-quality” investment assets which meet the needs of pension funds.
Andrew Griffith, the economic secretary of the Treasury, said that nothing was off the table when asked if the government might consider additional tax incentives in order to boost pension investments in UK growth areas.
He added, “A responsible government will not be profligate with public funds.” There is a tension when you give out a lot of incentives.
He said that “everyone should be bullish” (on the UK’s economy).
It’s very powerful. “It’s an excellent place to invest capital.”
Chancellor Jeremy Hunt will use his Autumn Statement to respond to a variety of consultations regarding proposals to unlock pension capital for UK Growth.