Pension reforms to pave way for increased equity investments
Published: 10:23 11 Jul 2023 BST
The government is planning on reforming pensions so that defined contribution (DC) schemes can invest more in equity.
Speaking at Mansion House, Jeremy Hunt announced the ‘Mansion House Compact’, a deal signed with leading pension providers such as Aviva PLC (LSE:AV.), Scottish Widows and Legal & General Group PLC (LSE:LGEN).
These providers manage around £400bln or around two-thirds of assets in the DC market.
The deal aims to allocate at least 5% of default funds for investing in unlisted equity by 2030.
“If the rest of the UK’s DC market follows suit, this could unlock up to £50 billion of investment into high-growth companies,” Hunt said in his speech on Monday.
Plans are also in place to help with “DC consolidation” by allowing funds to invest in a wider range of channels such as bonds, equity, and unlisted assets.
The Chancellor said final decisions about the reforms will be made at the Autumn Statement, but in the build-up, he would be directed by three “golden rules”.
Hunt said: “Firstly everything we do we will seek to secure the best possible outcomes for pension savers.”
“Secondly, we will always prioritise a strong and diversified gilt market.”
He concluded the final golden rule is to make sure the UK is always trying to strengthen its position as a leading financial centre by being able to fund the “precious” public sector.
