19 October 2023

FT's Cumbo: Pension funds resist UK government push to invest £50bn in growth projects

Pension funds are resisting a UK government push to invest up to £50bn in projects and business to support economic growth, saying the country is not an attractive enough destination for more of their capital.

Executives from the £1.3tn sector attending a conference in Manchester on Wednesday said funds looking to support the government’s growth agenda amid high pressure on public finances were encountering myriad barriers. These ranged from a lack of suitable investment opportunities to concerns about the high-risk nature of the areas the government was most keen for funds to plough their cash into.

Nest, the state-backed workplace pension fund with £33bn under management, said it was reluctant to expand its UK investments into early-stage companies, which had the potential for higher returns but also carried higher risk. “We want proven business models [to invest in],” Elizabeth Fernando, Nest’s chief investment officer, told the Pensions and Lifetime Savings Association (PLSA) conference. “Our job is not to support levelling up. It is to build retirement funds.”

In July, nine of the UK’s largest workplace pension schemes committed to invest at least 5 per cent of their “default” fund assets in areas that could potentially support UK growth, such as start-up businesses, infrastructure and assets to support the green transition.

The government believes this so-called Mansion House agreement, brokered by the City of London Corporation, which runs the Square Mile, could unlock up to £50bn in pension capital by 2030 if other UK pension funds follow suit. The British Telecom Pension Scheme, one of the largest private sector defined benefit schemes in the UK with £47bn of assets under management and 270,000 members, suggested the government could do more to attract retirement funds....

 more at FT

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