UK finance minister urges pension reform to boost growth and investment | Real Time Headlines

LIVERPOOL, England — Britain’s finance ministers are pushing hard for pension reforms to boost the country’s flagging investment and growth.

The annual Labor Party conference – the first time the centre-left party has been in power in 15 years – was packed with representatives from the City of London who urged the government to act decisively and set out plans to make retirement schemes more competitive.

William Vereker, chairman of UK bank Santander, sees pension reform as one of three avenues for economic growth, along with skills, education and regulation.

“Right now we’re almost entirely reliant on investment in this country, on the kindness of strangers. We’re reliant on outside companies, outside investors, et cetera, to invest in our stock market, to invest in our businesses, and that’s just not sustainable,” Verrick told the media on Monday. said a room full of industry insiders.

He added: “If we didn’t have domestic capital investing in domestic businesses, we wouldn’t see the growth that this government is so rightly focused on.”

Mullin O’Neill, BlackRock’s vice president of government affairs and public policy, said the new administration has a “once-in-a-lifetime” opportunity to overhaul the pension system.

“In terms of the growth agenda, we have been a long-time advocate for getting more DC investments into the private markets,” she said on Tuesday, referring to defined contribution, or retirement plans Based on money paid rather than money earned.

The comments echo those of Citi UK chief executive Tiina Lee, who told CNBC last week that domestic funds had long focused on low-risk and low-fee investments, resulting in “suboptimal” returns.

“For me, pension reform is the way to unlock growth in the UK economy,” Lee told Squawk Box Europe.

“When one thinks about the amount of long-term capital in the UK, almost £5 trillion is held by pension funds and insurance companies. To really unlock a fraction of that, investing in long-term infrastructure projects that will ultimately drive growth is absolutely the way to go,” she said.

UK Finance Minister Rachel Reeves announced a landmark initiative in July Pensions review As part of the “Big Bang” reforms that unleashed growth. The measures include plans to consolidate local government pension schemes into a larger fund and increase funding for high-growth businesses in the UK.

The UK government says such investment can advance the UK’s strategic interests, such as supporting regional development, critical infrastructure, medical innovation and decarbonisation.

Treasury economic secretary Tulip Siddiq said on Monday that boosting superannuation funds’ risk appetite to invest more in equities was crucial to Labour’s broader support National Renewal Plan.

“If we don’t free up capital in our retirement funds, we’re accomplishing nothing – that’s an investment in our country,” she said.

UK pension schemes have the lowest proportion of funds held in domestic equities and private assets among the world’s major pension markets. according to Think Tank New Finance. Only 4.4% of UK pension assets are currently held in domestic equities, below estimates Last year it was 6.1%, well below the global average of 10.1%.

Reeves said the UK could follow the lead of Canada, whose large funds invest in stocks and infrastructure. According to a new financial report, about 3% of the assets of the so-called Maple 8 Group Retirement Fund are in domestically listed stocks, with another 22% in private equity and 12% in infrastructure.

“The size of the Canada Pension Plan means they can invest more in productive assets like critical infrastructure than we can,” Reeves said last month.

The UK Local Government Pensions Scheme manages assets worth £360 billion for 6.6 million public sector workers, currently spread across 86 individual funds across England and Wales. If combined into a single fund, it would rank as the seventh largest fund in the world.

one flagship Next month’s International Investment Summit, expected to be attended by about 300 industry executives, will be a key test of the government’s ambitions to promote further investment.

However, promoting domestic investment and increasing returns will be difficult. Nathan Long, senior policy analyst at financial services firm Hargreaves Lansdown, said policymakers needed to have a clear understanding of the objectives of the reforms and the time it would take to materialize them.

“What happens if those returns are not realized in five, 10 years because of the types of asset classes you hold?” Long said at Tuesday’s conference. “Suddenly it looks like your plan is underperforming, but it’s not at all and it’s a byproduct of your decision to invest for the long term.”

BlackRock’s O’Neill, meanwhile, urged the government to “think together” and work to address the country’s chronic lack of savings alongside pension reform.