Aviva’s chief executive has attacked plans to force UK pension funds into investing their member’s pots in British startups and other unlisted, fast-growing businesses.
Amanda Blanc questioned the wisdom of the proposed “future fund” because it would take years to establish and be bureaucratic. She also criticized the suggestion that all UK defined-contribution pension schemes be forced to finance it. “I do not think that compulsion in free markets is a good thing.” “I don’t think that making it mandatory would be a good thing at all.”
Sir Nicholas Lyons has proposed that a new £50billion fund be created by requiring all UK defined contributions schemes to allocate at least 5% of their contributions.
Sir Nigel Wilson of Legal & General took a completely different approach, arguing for “soft compulsion”, to encourage pension funds invest more in UK-based growth companies.
He said yesterday at a Wall Street Journal Conference that “we just need to nudge them” (pension schemes) so they allocate a part of their assets in growth equity. Soft compulsion can include tools like placing a requirement to “comply with or explain” on schemes.
pension funds are likely to oppose any compulsion.
Nigel Peaple is the policy director of the Pensions and Lifetime Savings Association. He said, “We do not think that mandation would be necessary.” Pension savers don’t need it.
Both the Labour Party and the Government are looking at ways to channel more pension funds into UK non-listed companies. The parties have not ruled out any form of coercion.
Blanc, , whose company is responsible for managing pensions and investments assets worth £352 billion and four million employees, has also expressed concern that the returns on unlisted UK investments could be negatively affected if pension funds were allocated in large amounts.
Blanc stated that “not all of these opportunities will deliver a positive return.” “Everyone who rushes into an area rarely ends up well,”
The Lyons proposal forms part of broader plans to address perceived UK investment in growth companies and the declining success of the City of London, as a listing jurisdiction, for tomorrow’s fast-growth winners. The Capital Markets Industry Taskforce has raised concerns that the UK pension sector, which is worth £3 trillion, has reduced its allocation of UK equities to only 6 percent today from 53 percent in 1997.