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  5. Slow-moving pension funds should adopt 'risk-taking culture', city minister says


Slow-moving pension funds should adopt 'risk-taking culture', city minister says

Andrew Griffith said that pension plans should be prepared to take on a greater degree of risk in their investments. Photo: Chris Ratcliffe/Bloomberg

Pension City Minister urged funds to adopt a “culture of risk taking” as the Treasury develops plans to boost returns for savers using industry lifeboats.

Andrew Griffith said pension schemes should be prepared to take on a greater degree of risk in their investments amid fears that the reluctance to invest in the stock market is holding back the economy.

In an interview with The Telegraph, he said: “We are working to remove points of friction, streamline our rules, and encourage a greater culture of risk-taking.”

Treasury Jeremy Hunt is believed to be considering plans to transfer control of underperforming programs to the Defense Pension Fund (PPF), which currently protects people in retirement plans when their employer goes bust.

Officials are considering how they can encourage small, poorly performing defined benefit (DB) funds — old-fashioned, employer-sponsored pension plans that pay out a guaranteed share of an employee’s income at retirement — to roll into PPF, creating a super fund that can invest in a wider range of fast-growing UK assets.

Treasury Department sources said the idea was one of several options being considered, but it is understood that the PPF' The powers of s will require complicated changes in the law and cannot be implemented until the next election.

The government-backed body already manages nearly £40bn and was forced to step in and launch the Carillion and BHS schemes when the companies collapsed.

It is clear that Mr Hunt and his advisers are against forcing pension funds. to invest in British assets – unlike shadow chancellor Rachel Reeves, who suggested they could be ordered to pay £50bn into a “growth fund”.

1504 British pension funds underperform competitors

A Whitehall source said, “Under no circumstances should we impose.” A Treasury spokesman declined to comment.

The Tony Blair Institute will recommend in a report next week that sponsors of the smallest 4,500 DB schemes be given the option to move to PPF.

He will point out, that although the UK is the third largest market in the world, no single fund is among the world's top 40 companies.

The Institute believes the consolidation could turn PPF into a superfund of around £400bn, making it one of the largest in the world.


Mr. Griffith said that currently pension fund managers are not interested in earning higher returns. He said: “[We need] to shift the focus from funds that operate on their own at minimal cost to funds that look at results properly, and that's what's important here because it's about making sure, that long-term savers will receive the most secure pension. maybe.”

His comments came after City officials warned earlier this week that London was lagging behind rival financial centers because of its risk-averse pension industry.

Sir Nigel Wilson, Executive Director of Legal & The general said Britain's pension schemes are failing to support growing industries such as the life sciences and risk holding back the economy.

In a sign of a change in direction, the head of the pension regulator also vowed to prosecute trustees of struggling funds that let their members down.

On Friday, Mr Hunt will announce plans to allocate £250m of taxpayer cash to the Treasury's Lifts, an initiative designed to spur the creation of new investment vehicles for pension schemes to support UK science. and technology.

Mr Griffith said: “£250 million will be used to launch a new facility targeting defined contribution pension schemes, allowing them to invest in expanding some of the UK's most innovative companies.”

The Treasury will announce a call for proposals along with the announcement.

Smaller pension plans are shrinking

Baroness Altmann, former Pensions Minister, welcomed the move, adding: “This Lifts fund is just a small story, but there are billions of pounds of pension money that can and should be put to good use for the UK.

“By offering new investment ideas and long-term growth projects for new companies or badly needed social housing and infrastructure, pension funds can increase returns.”

Earlier this week, The Telegraph reported that thousands of underperforming pension funds are forcing savers to lose nearly £70,000 in lost investment returns.

There is growing concern that pension funds are increasingly moving away from equities. and instead invest in safer but less profitable assets such as bonds, in a growing problem known as de-equitization.

Mr Griffith said: “De-equitization is a longstanding feature of the market and it is a concern for some time, this is not new. People have only noticed this recently, but it's a concern in political circles and in the Treasury.

“It's one of the things we focus on when we think about financial services reforms. the sector as a whole and the pools of locked-in capital, whether in people's private savings, in institutional capital such as the work we did on Solvency 2, and in pension funds themselves.

“It's a combination of changing risk culture, gradually removing some of the friction… and offering new vehicles to invest in equities or high-growth sectors such as elevators.”

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