UPDATED: Chancellor Jeremy Hunt is today setting out reforms to allow billions of pounds’ worth of pensions to be invested into high-growth businesses.
Hunt hopes the pension reforms will improve the funding environment for start-ups and make UK capital markets more attractive, following a trend by UK start-ups to list on NASDAQ over the London Stock Exchange, such as Cambridge-based chip company Arm.
The chancellor will also announce in his Mansion House speech reforms to make it easier to buy and sell shares digitally and that he will cautiously consider the creation of Australia and Canada-style superfunds, something Government advisor Sir John Bell called for in April to help life sciences and tech start-ups.
Diverting capital into start-ups has been encouraged by many UK venture capital firms. In December, Labour announced a plan to link pension funds with venture capital and the idea has been advocated by economist Lord O’Neill and Oxford Capital’s David Mott.
Some UK pension companies such as Aviva, Legal & General and Scottish Widows, have also agreed to funnel five per cent of their investments into private equity and early-stage businesses, which could unlock up to £50bn by 2030.
Nine of Britain’s biggest defined-contribution providers — Aviva, Scottish Widows, Legal & General, Aegon, Phoenix, Nest, Mercer, M&G and Smart Pension — which together account for two thirds of the country’s defined-contribution workplace market, will commit to a target of allocating at least 5 per cent of the assets in their default pension funds to unlisted equities by 2030, which could unlock up to £50bn by 2030.
Naureen Zahid, Director of Investor Relations at OpenOcean, said: “The Chancellor’s announcement on major pension reforms and the creation of a new trading platform for private companies is a very welcome one. This move signifies a crucial step towards restoring investor confidence in the UK’s tech sector, following recent high-profile shifts in company listings to the US.
“By consolidating the fragmented pensions regime and exploring the creation of super funds, the government is tapping into a market opportunity worth up to £50bn. But decisive action is now crucial to translate these proposals into reality. The government’s convening power must be harnessed to engage institutional investors, while incentivising the private sector to participate actively in these reforms.”
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