UPDATED: Labour could force pension funds to invest in a proposed £50bn “future growth fund”, as the party backs more investment into fast-growth companies.
Rachel Reeves, shadow chancellor, told the Financial Times that “nothing is off the table” when it comes to the future growth fund, although she did not believe Labour would need to order pension funds to invest because of institutional investor goodwill.
But Aviva chief executive Amanda Blanc poured cold water on the Future Growth Fund idea, saying it would be complex, bureaucratic and take years to set up.
Blanc told The Times that she did not think compelling all UK defined-contribution pension schemes to fund it was “ever a very good think in free markets. I don’t think making it mandatory is a good idea at all”.
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The shadow chancellor is supporting a proposal by Nicholas Lyons, lord mayor of the City of London, to create a £50bn growth fund, with 5 per cent of every defined contribution pension scheme’s assets invested in it.
Lyons himself has said pension schemes should be forced to make contributions to the future growth fund.
The Lyons Future Growth Fund is just the latest pension-fund vehicle to be called for when it comes to investing in fast-growth UK businesses.
Back in 2021, then-chancellor Rishi Sunak said he expected a £500bn Long-Term-Asset Fund to launch before the end of 2021. The Long-Term Asset Fund would enable pension funds to funnel some of the mooted £500bn capacity into venture capital, enabling pension funds to invest more in start-ups and growth businesses.
Mr Sunak told Growth Business that it was up to pension holders to put pressure on funds themselves to invest in technology start-ups.
That same year, a Treasury review recommended that pensions invest in a £1bn fintech growth fund.
At the same time, the London Stock Exchange was working on a £300m UK Growth and Resilience Fund, which could have gone on to raise another £1bn.
Before that, former BGF chief executive Stephen Welton talked up a British Patient Capital fund, while ex-Treasury minister and Goldman Sachs chief economist also tubthumped for a £25bn patient capital fund.
None of these calls for pension funds to divert a percentage of capital into backing fast-growth British companies have come to anything.
The UK’s pension funds control £4tr of cash paid in by up to 30m people through workplace pensions, making the UK the second-largest pension market in the world.
Yet, unlike the USA, Australia and Canada where 4-5 per cent of pension cash is invested in technology businesses, in the UK just 1 per cent goes to SMEs.
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