The people who manage the UK’s pension wealth, estimated at around £3 trillion, met earlier this month at the Pensions and Lifetime Savings Association’s annual investment conference. A lot of issues were discussed, but the main topic of conversation was the Labour party’s plans to use some of that pension cash to help grow the UK economy. Many pension funds do invest heavily in UK companies but many don’t, choosing instead safer investments like bonds.
However most of the people who spoke at the conference agreed the government’s idea was great, in theory. But they also agreed that there was no formal framework for pension funds to invest ‘at scale’ in UK companies, particularly fledgling ones.
Anyone can come up with an idea – and Jeremy Hunt, Rachel Reeves predecessor as Chancellor, first introduced the plans back in the Mansion House reforms in July 2023.
But the reality, it appears, is that its being left up to the pension industry to come up with a way of doing this. Hunt did start a consultation, with the Treasury asking the pensions industry for ideas, but the bottom line is that pension funds are too worried about losing their savers’ cash to worry about Rachel Reeves plans.
Time and time again, while chatting to some of the fund managers, trustees and advisers, the issue of ‘scale’ came up.
In order to invest in more risky assets – and these would be fledgling UK companies – fund managers need scale. They need super-sized ‘products’ that allow them to invest across sectors as well as companies. To spread the risk, you could say.
Investment specialists say this is what they need to find dragons. Dragons are companies that provide huge amounts of growth, they do so well it doesn’t matter if 20-/30 other companies in the fund fail.
Dragons are good, they are the next Marks and Spencer, the next ARM, the next Tesco, the next (ahem) Tesla.
There is a solution, there always is. It’s just someone had to be brave. It doesn’t need to involve any legislation, or consultations or even another (and I’ve written about too many of these) ‘reviews’.
On my LinkedIn profile I asked about doing this. Most of my contacts and network – which includes some very bright ‘can do’ pension experts – agreed that if Reeves wants to do this she can.
So what Reeves needs to do is create a Great British Bond, that invests in private capital, private equity and productive finance.
(And while I’m here lets get rid of those terms and call it UK growth companies, because using so many nouns to describe the companies the government wants pension to invest in is confusing.)
A Great British Bond would be government gilt. Pension funds could invest in it, global asset managers could invest in it and us savers could invest in it. Let’s try and keep to UK only though.
It’s not as if savers are avoiding bonds. Hargreaves Landsdown found that on its investment platform trading in gilts (UK government bonds) was 63% higher in February than in January.
So the demand is there, now what is stopping our government from involving us in our own nation’s growth plans?
