UK pension funds back next phase of post-Brexit City shake up
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UK pension funds back next phase of post-Brexit City shake up
LONDON (Reuters) - Aviva, Legal & General and seven other pension firms intend to invest 50 billion pounds ($64 billion) in unlisted companies by 2030 to help the City of London remain a competitive global finance centre after Brexit, finance minister Jeremy Hunt said.
Under a non-binding agreement, Aviva, Scottish Widows, Legal & General, Aegon, Phoenix, NEXT, Mercer, M&G and Smart Pension will allocate at least 5% of direct contribution pension funds into unlisted companies by the start of the next decade.
The so-called Mansion House Reforms seek to deliver an "evolutionary, rather than revolutionary, change in our pensions market, and to strengthen the UK's position as a leading financial centre", the finance ministry said.
Hunt's reforms represent a follow-up to last year's "Edinburgh Reforms" which sought to attract international growth company listings to Britain after its departure from the European Union largely cut off the City's access to the bloc.
"By unlocking investment, we will boost retirement income by over 1,000 pounds a year for a typical earner over the course of their career," Hunt said in excerpts of a speech he was due to deliver on Monday to a gathering of finance leaders.
Only 1% of Britain's 4.6 trillion pounds of pension and insurance assets are invested in unlisted companies, compared with upwards of 6% in Australia.
Within a year, the new plan will target fintech, life science, biotech, and clean technology firms, but exclude property and infrastructure, where huge debts at Thames Water have raised questions about the role of private investors in utilities.
It follows efforts by City of London Lord Mayor Nicholas Lyons to set up a 50 billion-pound investment vehicle to back UK start-ups.
Private equity investments typically offer greater returns in exchange for taking a greater risk, and many pension schemes have preferred to squirrel away cash in safer government bonds.
