Labour will launch a pensions review, give the regulator new powers to force consolidation and establish a British ‘Tibi’ investment fund to help DC schemes invest in UK growth assets, if it takes office at the next General Election.
Publishing its Plan for Financial Services today, Labour says it will encourage UK pension funds to invest in UK assets to strengthen the domestic investment market.
The pensions review will cover defined benefit, defined contribution (DC) and public sector schemes, including local government pension schemes, and will engage with corporate sponsors, asset managers and venture capital and private equity managers.
The British Tibi fund is based on the model of the French Tibi fund which launched in 2019, bringing pledges of €5bn of institutional investment into tech companies by 2022. It will target venture capital and UK small cap funds, supported by British Patient Capital.
Labour says it will use the Tibi scheme to bring VC and institutional investors together to workshop ‘innovative DC-centric fee structures’ and convene DC funds with infrastructure investors to explore how to improve the credibility of policy stability, currently a barrier to higher levels of UK infrastructure investment.
The French government says phase 1 of the Tibi initiative has made France the leading ecosystem for financing new technologies in the European Union.
Labour says it will work with local government pension schemes to develop in-house fund management capabilities within pools to boost returns and create jobs in the regions.
The paper echoes the Conservative’s Mansion House reforms package, citing low exposure to UK equities in pension funds as a reason for lower returns for pension savers, even though DC schemes – the only types of scheme where individual investors are personally impacted by the investment returns delivered – have very high, sometimes 100 per cent exposure to equities.
It also plans to reform Solvency UK to unlock up to £100bn in capital from insurers to invest in productive assets.
Labour also plans to deliver a modern ‘Tell Sid’ campaign for retail share ownership, and will look to simplify the Isa landscape.
It also plans to give The Pensions Regulator new powers to force consolidation where schemes fail to offer sufficient value to members, and will ask TPR to provide explicit guidance around fund and strategy suitability and their expectation of a default cohort investment approach. It will review minimum performance standards for DC schemes.
Shadow Chancellor Rachel Reeves says: “Labour’s defining economic mission is to restore growth to Britain. This calls not just for a change in government, but a change in mindset: an active government prepared to work in partnership with business to remove the barriers to economic success.”
David Brooks, head of policy, Broadstone, says: “It is interesting that the Labour Party is keen to continue the journey of encouraging more investment in long-term illiquid assets such as productive finance.
“The continuity in pensions policy, despite any potential change in government, will please the industry and is to be welcomed. However, scepticism remains around the speed of change required to reach the government’s goals give the pace of consolidation needed as a pre-requisite for releasing the required levels of investment.”
“Labour is proposing stronger regulatory powers to force the wind up of under-performing defined contribution pension schemes. This is an interesting development which could increase the pressure on The Pensions Regulator to become more ‘hands on’ with underperforming schemes.”