Shadow chancellor Rachel Reeves has said a Labour government will implement significant interventions into the pensions market to boost investments in UK PLC.
According to media reports, Reeves is planning to review the way the UK pensions system works, and described the Mansion House Compact’s decision not to invest in UK companies as a ‘missed opportunity. However, she indicated Labour would not force schemes to invest in Britain.
The Compact is an industry-led voluntary initiative sponsored by the Treasury to increase investments in unlisted shares in order to improve the financial security of UK pension investors. The objective of the agreement is to ensure that at least 5 per cent of defined contribution (DC) default funds are allocated to unlisted equities by 2030. Ten providers have now signed up to the controversial arrangement, having resisted pressure from Chancellor Jeremy Hunt for the investments to be made in UK companies.
Labour is reported to be calling for the establishment of a government-backed vehicle for DC funds to invest with the state-owned British Business Bank, that would invest in UK growth assets.
The reforms would deliver an extra £21,000 to £37,000 in retirement income to an average saver, she said.
Darren Philp, director, Shula Policy and PR, said: “There is a lot of political talk about getting UK pension schemes to invest in the UK and productive finance and this will only ramp up as we head into a pre-election phase where the main parties try to outbid each other with eye catching initiatives to boost growth.
“But fundamentally pension schemes, whether defined benefit or defined contribution, are here to deliver value for their members and that has to be the acid test through which trustees and schemes make their investment decisions. Capital will naturally flow to where schemes can best meet their needs, regardless of whether that is the UK or elsewhere. Economic competence, economic stability, and having an economic policy that supports long term growth and improvements in productivity are the foundation of building confidence for pension schemes to invest.
“Coupled with removing barriers and making such investments easier this could make the UK a more attractive place for pension fund money. But there are no quick wins and while it is good to see that the politicians are stopping short of mandating where pension schemes invest, the signing of compacts and pledges will only get us so far without the fundamental improvements necessary to support UK economic growth.”