UK to steer pensions into high-growth sectors

REUTERS/Yves Herman

British finance minister Jeremy Hunt will spell out on Monday long-awaited plans to encourage pension funds and other asset managers to invest in high-growth sectors, the treasury said on Sunday.

In Monday’s speech at the City of London’s Mansion House, Hunt will explain how the reforms could increase returns for pensioners and unlock capital for businesses, the Treasury said.

The government – seeking to boost Britain’s slow economic growth without further increasing its hefty public debt – wants to persuade pension schemes to invest some of their funds in infrastructure as well as startups and green technology.

But the pensions industry has said it opposes mandatory investment quotas.

“Everything we do we will seek to secure the best possible outcomes for pension savers, with any changes to investment structures putting their needs first and foremost,” Hunt was set to tell finance executives, according to the treasury.

He was expected to announce a list of insurers and asset managers who have signed up in principle to invest more in alternative assets, a senior industry source told Reuters.

Hunt will also seek to assuage concerns that the push to secure funding from long-term investors such as pension funds could hurt the government bond market, saying in his speech that he would prioritise a “strong and diversified gilt market”.

Any changes to the pensions industry would be “evolutionary not revolutionary”, Hunt planned to say, vowing that the reforms would never compromise Britain’s competitive position as a leading financial centre.

Financial services lobby group TheCityUK said government policy should aim for pension funds to invest in growth and in turn deliver higher returns.

“On average, Australian and Canadian pension funds currently provide better performance. We need to follow their example, encourage consolidation of schemes and deliver better retirements, which will also support growth,” it said in a statement.

Hunt was also expected to reiterate that bringing down high inflation remained his priority, saying there could be “no sustainable growth without first eliminating the inflation that deters investment and erodes consumer confidence”.

In an interview with the Financial Times, Hunt said he would not agree to big tax cuts later this year – ahead of an expected national election in 2024 – if they made inflation worse and he also ruled out “inflationary” public sector pay awards.