Britain’s £50 billion pensions gamble provides ‘no guarantees’ for savers
- Britain’s proposals to jump-start the economy by channelling £50 billion of pension fund cash into fledgling firms could backfire on savers, experts said
- Millions of Britons who save into so-called defined contribution pension schemes are heading towards retirement outcomes that are worse than their parents’ generation
Britain’s financial services industry has broadly cheered fresh government proposals to jump-start the economy by channelling £50 billion (US$64.5 billion) of pension fund cash into fledgling firms, but the plans could backfire on savers, experts said.
Finance minister Jeremy Hunt on Monday unveiled a raft of reforms aimed at redirecting a greater proportion of a £4.6 trillion pool of capital managed by Britain’s pensions and insurance sectors into unloved UK assets by 2030.
The so-called Mansion House Reforms follow years of dwindling support for British companies by several major institutional investors, and concerns in some quarters that the City financial district is struggling to remain competitive as a global finance centre after Brexit.
The government rocked pension savers last September with a fiscal statement that drove government bond yields higher and forced pension schemes to scramble for cash, triggering a parliamentary inquiry into their investments.
Aviva, Legal & General and seven other pension firms have agreed non-binding terms to invest at least 5 per cent of defined-contribution pension savings in unlisted companies by the start of the next decade, moves seen as critical to supporting cash-strapped entrepreneurs.
