As was anticipated, Chancellor of the Exchequer Jeremy Hunt outlined his vision for pension reform that will enable these funds to invest in private firms. Hunt said he wanted to increase returns for pensioners while unlocking capital for early-stage firms.
We’ve grown faster than France, Italy, Japan or Germany.
Hunt said he wants the UK to become the next Silicon Valley, which means making the UK’s financial services sector better and providing more capital for innovative young firms.
Hunt described the Mansion House reforms in three parts;
“Firstly, I am announcing a series of measures to boost returns and improve outcomes for pension fund holders whilst increasing funding liquidity for high-growth companies.
Second, I will set out ways to incentivise companies to start and grow in the UK by strengthening our position as a listings destination.
And finally, we will reform and simplify our financial services rulebook to ensure we have the most growth-friendly regulation possible without compromising our commitment to stability.”
Hunt said the UK has the largest pension market in Europe at £2.5 trillion, but there is a “perverse” situation where these funds do not invest in high-growth firms. Going forward, Hunt aims to have at least 5% of defined contributions invested in unlisted equities – by 2030. Currently, the percentage is a mere 1%.
A consultation on local government pensions will consider investing up to 10% in private equity.
These reforms seek to “unlock capital from the private sector delivering growth not by subsidy, but by increasing support for entrepreneurs and investors who take risks to create long-term value.”
Addressing the decline in public listings, Hunt discussed draft legislation on prospectus reform that aims to enable firms to raise more capital, more quickly while boosting the UK as a listing destination of choice.
The Chancellor said that regulators must be willing to support innovation and do so more quickly, adding a statement on payments and the possibility of a digital pound.
“We are laying new legislation to give regulators the powers they need to reform rules on innovative payments and fintech services, and, together with the Bank of England, we are exploring potential designs for the digital pound should we decide to introduce it,” said the Chancellor.