Nine of the largest pension funds in the UK have agreed to invest 5% of their assets in startups, according to an announcement by the UK government. This move could potentially unlock £50 billion if the rest of the industry follows suit. Aviva Plc, Legal & General Group Plc, and M&G Plc are among the firms that have joined the compact, which commits them to allocate 5% of assets in their default funds to unlisted stocks by 2030.
The agreement was made in an effort to boost investment in growth companies and drive economic growth in the UK. Chancellor of the Exchequer, Jeremy Hunt, expressed his support for the move, stating that it would result in more investment in the country’s most promising companies. He also emphasized the importance of British pensioners benefiting from the success of British businesses.
In addition to the pensions deal, the UK government plans to roll back parts of European Union legislation that required financial firms to separate the cost of investment research from trading expenses. This move is seen as another step towards spurring investment in innovative businesses and lifting UK economic growth.
The announcement comes at a time when the UK is facing challenges such as a double-digit poll deficit for the governing Conservative Party against the opposition Labour Party and a cost-of-living crisis. Chancellor Hunt aims to address these issues and show that Britain is open for business after its exit from the EU.
The pensions deal is the latest in a series of financial services reforms announced by Chancellor Hunt in an effort to find post-Brexit benefits for the City of London. These reforms include relaxing capital rules and reviewing EU-era regulations concerning short-selling.
The Treasury stated that the pensions compact will increase returns for savers and that the initial signatories represent a majority of the defined-contribution pension market. The Lord Mayor of London, Nicholas Lyons, who helped organize the pact, described the reforms as a historic turning point that will secure a brighter future for retirees and channel billions into the UK economy. He believes that the agreement will support firms to grow, stay, and list in the UK.
Other signatories to the agreement include Scottish Widows, Aegon NV, and Phoenix Group Holdings Plc.
In addition to the pensions deal, the UK government also announced other reforms aimed at the financial services industry. These include measures to address the issue of high inflation, which is a major economic problem currently faced by the country.
Overall, the agreement between the nine UK pension funds to invest in startups is seen as a positive step towards driving economic growth and supporting innovative businesses in the UK. The move reflects the government’s efforts to secure a brighter future for retirees while also attracting investment and boosting the country’s economy.
