PLSA comments on Mansion House Reforms
11 July 2023
Nigel Peaple, Director of Policy and Advocacy at the PLSA said: “The Government has engaged with the pension industry over many aspects of the proposals announced today. It is important and very welcome that pension schemes’ ability to direct their own investment strategy in the best interests of their members has been protected. As is widely recognised, investments totalling around £1trn by pension funds in UK assets already support economic growth and are a major source of long-term investment in the UK economy.
“We welcome measures which improve access to a broad range of assets and schemes will always be interested in exploring investments which have a strong likelihood of generating good returns, within their risk tolerances, and in the interests of their individual members. The Government’s announcement of a bigger role for the British Business Bank in establishing suitable investment vehicles is encouraging and we would like it to provide a pipeline of suitable UK growth assets for pension fund investment.
“With the right policy and regulatory initiatives, and support from the right type of fiscal incentives, there is a potential for a win, win, win - for pension savers, schemes and the UK economy. However, this is a complex area, and it is easy to get the wrong outcomes, so the Government is right to propose undertaking a public consultation on all the key issues over the next couple of months.
“Today’s announcements include some measures on the consolidation of pension schemes. There is already a great deal of consolidation happening in the UK landscape, for example in the case of DC schemes operating in the automatic enrolment market, and in the Local Government Pension Scheme where assets are already being transferred to eight large asset pools. And over time, consolidation is also going to happen with regard to closed DB schemes as they buyout. Moreover, the Government is already taking action to encourage consolidation, for example, via the use of Value for Money tests in DC, and via Government direction in the Local Government Pension Scheme. However, today’s measures will speed up the consolidation that is already happening and go further by consulting on a legislative regime for a new form of DB consolidator, DB Super Funds, and by seeking views on a wider role for the Pension Protection Fund.
“It is important to remember that there are things other than consolidation that the Government can also do to facilitate investment in the UK, for example amending the rules applying to the AE market, introducing more flexibility in the TPR DB funding code for open DB schemes, and supporting the good governance of the LGPS scheme. Fiscal incentives, such as LIFTS, are also helpful. Perhaps of more importance than anything else is ensuring there is a pipeline of suitable investment assets – which is why we support a bigger role for the British Business Bank announced today.
“From the viewpoint of pension funds as investors, with cost transparency, the reforms to the market for research into companies seeking funding are welcome. The availability of high quality and reliable analysis of small but growing companies is essential if the U.K. is to be a country where new businesses can scale up and prosper.
“Finally, we hope very much that the Government will continue to do all it can to ensure that legislation passes quickly through Parliament to increase automatic enrolment pension saving by introducing pension saving from the first pound of earnings and extending it to include 18 t0 21 year olds. More money going into pensions is a key way of ensuring more money will be available in retirement.”
Mark Smith, Head of Media Relations
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Cali Sullivan, PR Manager
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