The prime minister and chancellor have challenged UK pension schemes to back Britain’s “entrepreneurial spirit” by increasing investment into new green technology and unlisted research start-ups.
In a letter to institutions published today, Boris Johnson and Rishi Sunak draw parallels with the long-term investment programmes of Australian and Canadian pension schemes, which have far higher investment into unlisted companies as well as infrastructure assets.
The letters calls for action from pensions schemes to put more money into the UK’s “world leading research sector”. The letter says this could help “ignite an investment big bang” that would “unlock the hundreds of billions of pounds sitting in UK institutions”.
This is said could support the government’s levelling up agenda, by investing in “UK assets that require longer-duration investments”.
The letters says this could also lead to better returns for UK pension savers who at the moment are too heavily reliant on returns from stock market listed companies.
The letter states: “It’s time we recognised the quality that other countries see in the UK, and back ourselves by investing more money into the companies and infrastructure that will drive growth and prosperity across our country.
“We want to see UK pension savers benefiting from the fruits of UK ingenuity and enterprise, being given the opportunity to back British success stories and secure higher returns and better retirements.”
Some industry leaders said they recognised the need for pension funds to increase the proportion of longer term investments, though they said the government would need to speed up plans for changes to City regulations before that could happen.
Chris Cummings, chief executive of the Investment Association, said the government initiative would “require a new partnership between the regulatory authorities and industry to ensure that pension funds and retail investors have access to transparent, well governed funds that return good value for money”.
However this letter has been dismissed as “hot air” by leading pension consultant John Ralfe, who claims that investments in start-up unlisted businesses will not provide the income stream that DB schemes require, will being too costly and not transparent enough for DC schemes.