The government has had private talks on plans to funnel tens of billions of pounds of pension funds into infrastructure and start-ups to boost the economic rebound.
The Mail on Sunday can reveal that Treasury officials have met with senior pension officials over the controversial scheme that would unlock some of the UK’s £ 2.2 trillion pension jars and split them between fast-growing businesses, transportation projects, real estate and carbon-friendly investments.
Industry sources said the government and regulators have discussed how a portion of workplace pension plans – those that staff are required to join – would go into a fund to be launched. expected this year.
Rishi’s mission: Government held private talks on plans to funnel tens of billions of pounds of pension funds to infrastructure and start-up companies
The long-term asset fund, which was announced by Chancellor Rishi Sunak in November, will inject money into sectors of the economy and long-term projects that are generally inaccessible to pension savers, such as as construction projects and private companies.
Sources said that occupational pension funds could invest part of employee savings in the new fund through a “default” investment option – the standard choice many choose when joining their retirement. ‘business.
It would be possible to opt out, but in reality most workers would contribute by joining the default plan.
This could mean that billions of pounds are automatically funneled into the fund.
The plan emerges as the government seeks other sources of liquidity to help the economy rebound from the global pandemic.
It would provide vital support to British start-ups so that they do not seek to invest abroad.
Pension fund bosses have started to show support for the plan they say will provide savers with another source of income instead of relying on traditional stocks and bonds.
However, the plan is expected to spark debate after the downfall of top fund manager Neil Woodford, who took off after betting on private companies.
Critics warn that retirement savers will be pushed into hard-to-sell or “illiquid” investments. The Investment Association, a powerful industry body, warned that savers “understand that they are committed to investing for the long term” and that they “may not be able to get their money back quickly.”
A chain of real estate funds was shut down during the pandemic, trapping thousands of investors as fund managers were unable to sell investments in time to respond to withdrawal requests.
A retirement boss warned last night that it could be difficult for retirees to access their money quickly. He said: “If we invest in HS2, for example, there is no expectation that we could sell some HS2 to withdraw our money tomorrow if we retire. ”
A big hurdle is a limit on the fees that workplace pension plans can charge. Last week, the government revealed it would ease the limit on workplace pension charges from October, so that workplace default funds can more easily invest in illiquid assets such as infrastructure and private equity, which are more expensive to manage. Some experts retaliated by saying it would increase the charges on pensions.
Sunak said last year that the fund “will encourage UK pension funds to devote more of their £ 500 billion in capital to our economic recovery”. But he did not specify how the contributions would be paid.
Workplace programs are designed by companies such as Legal & General, Royal London and Phoenix Group. The trustees approve the retirement investments and determine whether they are suitable for the members.
Nigel Wilson, managing director of Legal & General, said opening up access to private assets could “deliver better returns” to savers while helping the economy.
He said the Long Term Asset Fund “could become a useful instrument for doing this, but we also need a shift in mindset and some powerful nudges – maybe even a soft restraint – to ensure that pension administrators and their advisers engage in productive finance and inclusive capitalism. ‘.
Michael Eakins, Chief Investment Officer of Phoenix Group, the UK’s largest pension company, said: “When we engage with our policyholders, they quite like the idea of their pension savings being deployed in a way that is which is good for local economies. ”
A spokesperson for the Department of Work and Pensions said: “We are passionate about how people can get the best results from their retirement investment and we are collecting perspectives to make it happen.
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