Tony Blair Institute proposes radical UK pension superfunds

Under “extremely radical proposals”, tens and tens billions in UK business growth could be unleashed by pooling together pension funds from the public and private sectors. Each “GB superfund” would have assets up to £500bn.

The Tony Blair Institute has released a report that aims to reverse years of decline in the capital markets through the creation large pension funds similar to those found in Canada and Australia.

The study found that, despite the UK being one of the largest Pensions Markets in the World, overseas pensions invested 16 times more into British Venture Capital and Private Equity than did domestic public and privatized pensions.

“Both pensioners as well as the economy have suffered,” the report, Investing in Future: Boosting savings and prosperity for the UK.said.

Jeegar Kakkad is the director of policy at TBI. He said, “We need reforms that will benefit pensioners while igniting a fire in the UK economy.” “The UK’s innovators and entrepreneurs shouldn’t need to look overseas for capital to match their ambitions.”

TBI’s proposal would see Pension Protection Fund (UK’s £39bn scheme that acts as a lifeboat for corporate pension plans) take on a more expanded role, becoming a fund consolidator. This would require changes to the legislation.

The report stated that instead of failing to transfer a Corporate Pension Fund to the PPF and preserving benefits, employers sponsoring the smallest 4,500 UK defined benefit (DB) or final salary style schemes, could opt into the PPF with tax incentives.

According to the document, this new fund of £400bn, dubbed GB Savings One, could invest up PS100bn into UK infrastructure, businesses and start-ups.

The PPF model will then be implemented throughout the UK as a series regional funds, which are not for profit and range in size from £300bn to £500bn. The PPF model would gradually absorb all 27,000 UK DB funds as well as the local government pension plans, remaining DB schemes and possibly the public sector pension schemes.

The report stated that these superfunds will generate “better and more secure” returns than the 5,200 existing DB Funds, as well as strengthening pensions for “the entire generation” stuck with inadequate provisions since the closures of DB Funds over the last two decades.

The Pensions and Lifetime Savings Association (PLSA), which represents 1,300 workplace pension plans serving 30 million savers, stated that the paper contained “some extremely radical, but also extremely unpractical” methods to encourage pension funds and insurance companies to invest in the UK.

Nigel Peaple is the director of policy, advocacy and research at PLSA. He said that there are simpler and faster solutions. “The government and the pensions industry have already worked intensively on these issues, and, as long as they always put savers’ interests first, they should lead to better outcomes for all.”

Mick McAteer is the co-founder and former board member of Financial Conduct Authority. He said that the UK lacked the kind of collective risk sharing mechanisms which could make an approach of the size suggested in the paper work.

TBI’s pension proposals are coming at a time when the topic of pensions is becoming a growing focus of political attention ahead of next year’s general elections. Jeremy Hunt is considering a reshaping the PPF as he seeks to unlock billions in private pension capital to boost UK businesses.

, the Labour Party’s Rachel Reeves as shadow chancellor , has not ruled from forcing pension funds into areas that will help to boost economic growth.

We contacted the British Private Equity and Venture Capital Association for a comment.