Schroders boss against idea of forced pension fund investment
Published: 11:59 30 May 2023 BST
Schroders has warned against Labour’s plan to force pension funds to invest in a government-run investment fund for Britain.
In a letter to the Telegraph, Peter Harrison, the fund manager’s chief executive, said what was needed was not more “policy muddle” but a change in our [the UK’s] whole investment culture” to avoid the country falling further behind global rivals.
A £50bn future growth fund, that would see every defined contribution pension scheme contribute 5% of their assets, is being backed by Labour as a way to reinvigorate the UK tech sector.
Harrison, however, argues that the root of the problem is the lack of risk capital in the UK due to decades of structural inefficiency, something forced contributions would exacerbate.
“We need to ensure their pension managers are not inhibited in selecting these investments on their behalf, “ he wrote, adding if pensions funds were freed up it would allow UK markets to thrive again.
“Risk capital is the oxygen of growth. The UK’s comparative lack of this type of capital is the fundamental problem which all reforms should join in addressing.
“If we get this right, we can move toward ending the persistent problem of UK companies lagging at lower valuations than their US counterparts – which in turn is what makes UK companies such attractive targets for overseas buyers.”
Harrison is in favour of consolidation of the plethora of small pension funds, pointing out that 25,000 schemes (out of 27,000 in total) have less than twelve members.
“Small, fragmented schemes are hugely hindered in the breadth of available investments. They cannot access many of the most promising growth assets,” he said.
