The UK government has unveiled proposals aimed at unlocking tens of billions of pounds from pension funds for investment in start-ups and high-growth companies.
In his annual Mansion House speech, Chancellor Jeremy Hunt elaborated on his initiatives to enhance the attractiveness of UK capital markets. He revealed that a voluntary agreement among major pension firms—such as Aviva, Legal & General, Phoenix, and Scottish Widows—to allocate five percent of their investments to private equity and early-stage businesses could provide up to £50 billion in funding for start-ups and small to medium-sized enterprises (SMEs) by 2030.
Hunt stated, “British pensioners should benefit from British business success. By unlocking investment, we will boost retirement income by over £1,000 a year for the average earner throughout their career. This also means more investment in our most promising companies, driving growth in the UK.”
Louis Taylor, CEO of the British Business Bank, expressed her support for the Chancellor’s proposal to explore the establishment of a vehicle that would accept third-party capital, including pension fund investments.
However, some experts remain skeptical about the effectiveness of these proposals. James Baxter, founder of Tideway Wealth, noted that Hunt’s plan only addresses a small fraction of the UK pensions market, overlooking the majority of defined contribution (DC) schemes and the entire defined benefit (DB) market, as well as public sector schemes. He emphasized that the overall UK pensions market comprises approximately £2.5 trillion, making Hunt’s target of £50 billion seem minimal. Baxter argued for a more ambitious approach to truly benefit those saving for retirement and to stimulate sufficient investment in UK companies and infrastructure.
Additionally, the government has initiated an independent review led by Joe Garner, the former CEO of Nationwide Building Society, to assess the future of retail payments, including the consideration of mobile payment technologies.
Hunt also intends to reform regulations governing the buying and selling of shares and aims to increase stockbroker research on listed companies. In tandem with these efforts, the government plans to transition to fully digital share certificates for public companies to streamline and reduce costs associated with managing share registers.
Lastly, Lord Mayor of London, Nicholas Lyons, has introduced the Mansion House Compact to promote long-term capital investment in UK growth companies. This initiative encourages pension schemes to allocate more resources to unlisted equities, including venture capital and private equity, ultimately aiming to enhance retirement incomes for UK savers. Co-founders of Smart, Will Wynne and Andrew Evans, welcomed these initiatives, highlighting their potential to foster innovative, high-growth UK companies and improve retirement outcomes for savers in the country.