The government has been in discussions with insurers to commit billions of pounds to start-ups, infrastructure and other projects. This agreement is expected to be a major part of the Mansion House Speech of the Chancellor next week.
According to people with knowledge of the situation, several large insurance companies are planning to agree to invest 5% or so of their defined contribution pots, which are managed by them and whose retirement payouts depend on the performance of investments. Jeremy Hunt, Chancellor of Exchequer, is expected to reveal the details of this plan during his July 10 speech to City grandees.
Over time, the level of commitment could be in the hundreds of billions of dollars, far below the £50 billion pool ($63.4 billion), proposed by Nick Lyons. Lyons is a veteran finance professional who currently serves as the Lord Mayor of London. The government hopes that the pledge will nevertheless kick-start reforms, which could lead to much greater investments in UK growth assets from the country’s retirement funds.
Negotiations over the so-called Compact Agreement are still ongoing. Two people said that firms are waiting for the Treasury to finalize the wording of the agreement before they commit. A variety of objections were raised by the government, which led it to abandon a plan that would have mandated firms to give over a portion of the money managed.
A spokesperson for the Treasury said, “We can boost the returns of British pensioners through increased investment in UK’s fastest-growing sectors.” This will also unlock billions of dollars for our most innovative businesses, ensuring they have access to the finance needed to scale up and go public in the UK.
Hunt will also be expected to outline the next steps for the Edinburgh Reforms of the UK government, which were announced in December and aimed to improve the competitiveness of the UK financial markets following the EU exit. Rachel Kent is expected to provide an update regarding a review of payment for analyst’s research.
This would address concerns that asset managers have expressed a “UK Pensions Criticize FCA Plan to Relax London Listing Rules”>about potential plans to water down rights such as votes on related party transactions. This would address concerns asset managers have raised regarding potential plans to weaken rights, such as voting on related party transactions.
Pension reforms are the result of a series squabbles. One was over the potential roll-up of defined benefit pensions – which provide a fixed payment at retirement – into Pension Protection Fund. This idea is still being discussed in government circles but will likely be opposed by the Treasury as it would require taxpayers to underwrite billions of pounds worth of investments.
Several people have said that the progress made by insurers in terms of their investment commitment is partly due to the government’s push for reforms on the Solvency II capital regulations sector.