Chancellor Jeremy Hunt confirmed that DC pension schemes will be required to disclose their UK and International investments and warned that ‘further steps’ may be necessary to boost further domestic investment.
In his Budget speech Hunt cited the Australian pension system, which invests more heavily in its domestic economy and illiquid assets.
He added that better disclosure from DC pension schemes in the UK will help determine whether they are meeting international best practice standards, and warned steps would be taken to improve domestic investment if UK schemes are failing on these international comparisons.
Hunt added that there would be new vehicles launched to encourage greater investment into UK growth opportunities, designed to boost investment from DC schemes and other institutional investors.
Hunt said these measure will build on the Edinburgh and Mansion House compact.
As part of wider measures to boost investment into the UK economy Hunt also revealed he would be launching a new ‘British Isa’ product, which would give savers an additional £5,000 annual allowance to invest in UK assets.
He also reiterated that he would be giving new powers to The Pension Regulator and Financial Conduct Authority to ensure that pension schemes are judged on overall returns, rather that costs, with powers to close schemes that are failing to deliver on these new value for money calculations.
Hunt said that there would be further consultation on the ‘pot for life’ measures, making it easier for employees to take their pension pots with them when they change jobs.
Standard LIfe managing director for workplace Gail Izat says: “The reiteration of a commitment to the introduction of a pot for life comes hot on the heels of the Government’s Value for Money framework announcement and push for greater disclosure around investing in the UK, and should be viewed in the context of the wider Mansion House reforms.
“While pot for life could complement the current Government and regulatory push for fewer, bigger schemes, which could help to ensure customer outcomes are a central focus and underperforming schemes are required to act, a pot for life scheme is not a short-term fix.
“Its successful introduction requires a significant level of planning and preparatory work to overcome the high level of complexity that has been built into our pensions system in the UK over the many decades of constant change to regulation and legislation.
“Australia provides the most clear template for this model but even there its introduction came from a less complex market backdrop and was the culmination of many years of reforms that consolidated the pensions system, created a robust data sharing framework and established high quality clearing houses.”