The government will also encourage defined contribution pension schemes – which do not guarantee a set income at retirement and are the default plan for most UK workers – to pool their cash, including in a new “superfund”. We use Google reCaptcha to protect our website and the Google Privacy Policy and Terms of Service apply.
For more information see our Privacy Policy. Privacy Notice: Newsletters may contain info about charities, online ads, and content funded by outside parties. Hunt will ramp up the consolidation of local government pension schemes over the next two years and double their investment in private equity investments to 10%, potentially unlocking another £25bn by 2030. The so-called “Mansion House compact” – which was also been signed by Aegon, Phoenix, Nest, Smart Pension, M&G and Mercers – could release £50bn from defined contribution pension funds by 2030 if other pension schemes follow suit. The Treasury confirmed it had struck an agreement with large pension fund managers, including Aviva, Scottish Widows and Legal & General, that will see 5% of assets in their default pension funds invest in private and high-growth companies. “This also means more investment in our most promising companies, driving growth in the UK.” By unlocking investment, we will boost retirement income by over £1,000 a year for typical earners over the course of their career,” Hunt is expected to say. “British pensioners should benefit from British business success. The government believes the reforms could translate into a 12% bump in pension returns for the average earner who starts saving at 18 years old.
While the UK’s auto-enrolment programme – which has made workplace pension contributions compulsory for most employees – has helped the UK become the largest pensions market in Europe, leading to savings of £115bn in 2021 alone, Hunt believes investment opportunities are being missed. The Treasury claimed the Mansion House reforms would not only help burgeoning industries, but could result in higher returns for workers’ retirement funds.
The reforms are meant to support wider government plans to attract more business investment, and come months after Hunt reiterated his ambitions for the UK to become the next Silicon Valley. The government will create new investment vehicles that would give future retirees a stake in homegrown private companies – including in fast-growing fintech and biotech startups – that have increasingly snubbed the London Stock Exchange and turned to foreign investors for cash. He will also confirm that the Treasury has struck a deal with nine of the largest pension providers that would result in firms earmarking 5% of retirement funds towards private investments.
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