The Pensions and Lifetime Savings Association (PLSA) and the Association of British Insurers (ABI) have joined forces to launch four measures in response to the UK government’s plans to grow the nation’s economy through pension investments.

Last July, Jeremy Hunt, the UK’s chancellor of the exchequer, announced plans to unlock up to £75bn of additional investment from defined contribution (DC) and Local Government Pension Schemes (LGPS) to help grow the UK economy and deliver benefits to savers.

PLSA and ABI – which collectively represent the UK pensions industry, from defined benefit (DB) to DC workplace pensions schemes, including master trusts and insurers – jointly welcome the UK government’s ambition “for pension funds to play a greater role in supporting growth in the UK economy”, they stated.

However, the duo has developed several recommendations to ensure policy proposals work in the “interests of the millions of UK workers saving into a pension for whom our membership safeguards £2.5 trillion in assets”, they added.

Four measures

nigel peaple

Nigel Peaple at PLSA

Nigel Peaple, director of policy and advocacy at PLSA, said: “UK pensions already invest around £1 trillion in the UK economy, in particular through their ownership of government and corporate bonds and listed equities. The PLSA and ABI have worked together to identify what more government can do to attract further pension investment in the UK, provided the investment is in line with the interest of savers.”

He added: “This is a complex area, but we have picked out four areas for action: higher pension contributions, the right regulation, government action to support investment opportunities, and measures that enable the consolidation of pensions that is already under way. Taken together, our organisations believe this is the right way to support growth in the UK and to look after the interests of pension scheme members.”

The associations support the Mansion House Compact as a positive step towards increasing investment in private markets and they are actively involved in the Pensions and Private Capital Expert Panel to facilitate more DC pension investment into private assets.

They said that more pension investment in scale-ups “will certainly have an impact, helping them grow and thrive, and this is at the core of the Compact”.

Investments in other private assets such as private credit and infrastructure, also impact scale-ups and will help enable the UK to achieve its net zero targets if they are invested in climate solutions, the duo said.

The first measure would be to ensure better adequacy in DC pensions and a bigger pool of investable capital. Most private sector pensions are DC, but low contributions risk retirement shortfalls.

The second measure would be to make regulations work better for investment and savers. “Regulation must make it as simple as possible to invest in illiquids where it is in the interest of savers,” they stated.

The third measure would involve increasing investment opportunities – developing an effective pipeline of assets with good risk/reward profiles for pension schemes to invest in UK growth.

Finally, the fourth measure would entail continuing to focus on consolidation, ensuring that consolidation takes place in the best interests of members.

Yvonne Braun, ABI director of long-term savings policy, said that optimising asset allocation is not enough. “We also need to ensure people save enough, regulation works, there is an effective pipeline of investment opportunities, and much greater consolidation.”

She said the four measures being proposed will “drive UK growth, and we will continue to work with our partners at PLSA and with government to advance this agenda”.

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