Chancellor Predicts Pension Revamp Will Raise Investment in 'Most Promising Businesses'
Image Credit: HM Treasury
Pension companies anticipate that the newest reforms in the financial services sector will enable them to put money into the shift to net zero emissions.
Tonight, Jeremy Hunt is set to give his initial Mansion House speech as Chancellor and present a series of reforms to improve returns for pensioners and stimulate investment in green industries and other high-growth sectors.
The Treasury Department announced that the 'Mansion House Reforms' could lead to up to £75bn of extra investment from defined contribution and local government pensions, supporting the government's aims to stimulate economic development.
The Treasury has declared that the new reforms will build on the Chancellor's Edinburgh Reforms and Solvency II reforms, aiming to liberate an estimated £100bn in investments for low-carbon infrastructure by reducing obstacles blocking such investments.
The government declared tonight that it will collaborate with the pensions sector to raise investment in private companies. The Treasury mentioned that Australia's pension plans pour ten times more money into private markets than those in the UK.
Hunt is to declare that nine of the UK's largest Defined Contribution pension providers have pledged, known as the Mansion House Compact, to invest five per cent of their default fund resources into unlisted equities by 2030. It is estimated that if all UK Defined Contribution pension plans take up this accord, it could result in approximately £50bn being directed into high-growth enterprises.
The Chancellor has requested that the British Business Bank consider the government taking a more active role in creating investment options for pension funds to direct resources towards strategically significant industries. Additionally, the government has set aside £250m through the Long-term Investment for Technology and Science (LIFTS) program to motivate the formation of industry-led investment vehicles.
According to Hunt, British retirees should be able to reap the rewards of the success of British businesses. He believes that, by unlocking investment, the average earner's retirement income could be increased by £1,000 a year throughout their career. In addition, this would result in more investment in the country's most promising companies, leading to growth in the UK.
Hunt is anticipated to unveil additional modifications to entice the most rapidly developing firms worldwide to list on the UK's stock exchange, such as measures to streamline prospectuses for Initial Public Offerings (IPOs).
Brent Hoberman, executive chairman and co-founder of Founders Forum and Founders Factory, expressed his pleasure with the package, saying it would allow more capital to be "usefully invested in UK funds and scaleup companies".
He stated that this should be good news for future industries in the UK as they will be able to bring in more capital, thereby creating more national champions and generating growth, jobs, and higher tax revenue. The reforms will let the UK take advantage of the momentum in these vital parts of the economy and stimulate the connection between its leading financial organisations and the entrepreneurial sector.
Chris Hulatt, the co-founder of the investment firm Octopus Group that, backs clean tech giant Octopus Energy, expressed his approval of the new reforms. He commented, "The government's initiative to make the UK a more inviting place to found a business should be praised, and we back measures that offer private companies more prospects to acquire funding." He added that "discovering new pathways for the most talented entrepreneurs to access capital while constructing companies is essential to sustaining the UK's place as the best nation to initiate, construct, and expand a business."
Industry authorities within the pensions sector proposed that the Mansion House Reforms could help in furthering their goals to increase investments to promote the shift to net zero.
Aegon UK's Chief Investment Officer, Tim Orton, declared that the firm is proud to have signed the Mansion House Compact. He noted this would "foster possibilities to fulfil our climate objectives on the road to achieving net zero".
Mike Eakins, the chief investment officer at Phoenix Group, shared similar sentiments when he said that only nine per cent of UK pension funds are invested in alternative assets. In comparison, 23 per cent of other major pensions markets have done so. He believes that with the right regulatory environment, Phoenix Group could invest a maximum of £40bn into sustainable and productive assets, aiding economic growth, bringing about greater equality, and helping to combat climate change while keeping policyholder protection paramount.
Hunt is predicted to allude to green industries in his address barely but to emphasize the reforms' capacity to draw investments in rapidly expanding companies.
An expert from the industry cautioned that while the package was appreciated, more was needed to achieve the government's declared aim of creating the UK as the world's first net zero financial centre and releasing more money for green initiatives.
It was stated that significant pension changes needed to be made, criticizing that the diagnosis of the predicament was accurate, yet the proposed solution was inadequate.
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