Jeremy Hunt promised “evolutionary, not revolutionary” reforms to allow pension funds to make billions of pounds of riskier investments in fast-growing companies to boost economic growth.
Hunt will outline plans on Monday in a speech in the City of London to encourage the financial sector to “unlock capital” and increase returns for retirees.
In addition to regulatory reforms, he will welcome an agreement with leading pension companies to allocate 5% of their investments, an amount that could reach GBP 50 billion, to fast-growing companies.
Aviva PLC, Legal & General Group PLC, and Phoenix Group Holdings PLC are among the companies participating in this initiative.
Pension offices were pleased that Hunt did not make the step mandatory, as the sector had warned against it.
In his annual Mansion House speech, the Chancellor will promise that the changes will prioritize the needs of pension savers.
“It will be an evolutionary, not a revolutionary change to our pensions market,” he is expected to say.
Hunt will pledge to prioritize a “strong and diversified” gilt market, meaning he will not force companies to favor riskier investments over low-risk government offerings.
He will also establish a “golden rule” to never implement changes that “compromise” the sector, referring to what he calls the Mansion House Reforms.
Nigel Peaple, Policy Director at the Pensions & Lifetime Savings Association, said, “The Chancellor has today confirmed that the pension sector retains the freedom to invest in the interests of the individuals whose savings they manage.
“This is the key priority for the pension sector, and we are pleased that Hunt has listened to our views on this important issue.
“Following the disruption in the gilt market last September, it is reassuring that the government is committed to a strong and diverse gilt market and, therefore, aims for evolution rather than revolution in pensions.
“We look forward to continuing our dialogue with the government on the proposed pension reforms, always striving to achieve outcomes that are a ‘win, win, win’ for savers, pension schemes, and the United Kingdom.”
Michael Moore, Chief Executive of the British Venture Capital Association, said, “We are pleased that the Chancellor recognizes what we have known for a long time, namely that British pension savers are losing out.”
