Major British pension funds pledged on Tuesday to invest an extra £50 billion ($66 billion) into UK businesses and infrastructure as part of Government plans to fund public projects and boost economic growth.
Tens of millions of workplace pension scheme members will now see more of their savings invested in higher-risk, potentially higher-reward assets like early-stage businesses and green energy, alongside stocks and bonds.
Lloyds Bank’s pension arm Scottish Widows refused to sign up the agreement, known as the Mansion House Accord, The Telegraph reported.
“We will continue this investment approach to support our communities where it generates strong returns for pensioners,” he said.
Rachel Vahey, head of public policy at investment broker AJ Bell, said the Chancellor “hopes to create a big enough life raft to save her rocky government finances through increased UK investment” but she raised concerns over the impact on savers.
“But we can’t really say trustees are working independently if they have signed up to this mandate. Instead, it feels as if the main question of what is best for the pension saver is getting lost in this tussle to seize control of pension assets.”
Investment should be driven by value ‘not political pressure’
Lisa Picardo, chief business officer UK at pensions platform PensionBee, said investment decisions should be driven by “long-term value, transparency and suitability, not political pressure”.
Picardo said: “If this genuinely offers an opportunity for strong returns with sufficient liquidity, these asset classes will attract capital without the need for compulsion.
Jason Hollands, managing director at wealth management firm Evelyn Partners, warned that “past performance is not a guide to the future”.
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He also warned that big investments in infrastructure and other assets which cannot be easily converted to cash “is not without risk”.
“Could this be the thin end of the wedge in terms of the Government trying to co-opt pension funds into helping drive its objectives?” he said.
“Pensions have a fiduciary duty to deliver decent risk-adjusted returns for their members, not serve domestic public policy goals.”
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