Pension funds could do so much more to boost Britain – this Mansion House Compact is just the very start
Chancellor could and should be much more ambitious for pension funds to boost Britain.
Mansion House Compact is welcome as far as it goes – but is just the tip of the iceberg.
Just 5% of funds helping start-ups and scale-ups from Defined Contribution schemes by 2030 and perhaps another 5% of assets from Local Authority pension schemes, seems rather unambitious.
At least 25% of each pension fund originated from taxpayer reliefs – with tax and National Insurance reliefs costing taxpayers around £70billion a year.
I would urge the Chancellor to be bolder in his welcome initiatives to ensure more of our domestic pension fund contributions are directed to benefit British growth.
With a fiscal deficit soon exceeding 100% of GDP, debt-servicing costs mounting, the attractiveness of UK financial markets waning and domestic institutions radically reducing support for British assets, it is time for the Chancellor to seize the opportunity to ensure more of our domestic pension assets are used to boost British growth and pave the way for a stronger economy in the long-term.
It is time for revolution, not evolution, with more money being used at home, rather than leaking overseas. Britain is falling behind in terms of productivity and technology funding, as well as eroding the once-robust domestic institutional asset base that supported UK companies. This is threatening our country’s position as a global financial centre that punches well above its weight and can help to increase national wealth to fund public services and sustainable growth.
The Chancellor is right to ask the British Business Bank to explore the case for the Government to play a role in establishing dedicated pension products. The £250m long-term investment fund for technology and science is also welcome, but again there is far more that could be spent from pension assets on such initiatives, if only the caution of regulators and trustees were replaced by ambitious long-term investment in a broadly diversified range of assets that can benefit all
There is a potential for a win-win situation, boosting the prospects for British businesses, UK financial markets, the domestic economy, and society – while also delivering better risk-adjusted long-term returns for pension holders.
The Local Government Pension Schemes are fully underwritten by taxpayers and just trying to unlock £25billion by 2030 also seems relatively unambitious. These pension funds could be harnessed to boost local housing projects across the country, to improve business conditions and infrastructure across the regions and still deliver good returns over time from a carefully constructed portfolio of assets spread across sectors and regions.
Finally, it seems that encouraging more UK pension funds to invest in domestic quoted equity markets, could help reverse the decline in quoted UK equity market attractiveness, due to the eroded capital base that used to support our domestic companies.
Plenty of work still to do, let’s hope this is just the start of making better use of UK pension assets, both from Defined Contribution and Defined Benefit funds, to boost all our futures.