Chancellor set to open up DC pensions billions for UK ‘scale-ups’

Chancellor Philip Hammond is expected to unveil plans to use billions of pounds of defined contribution pension money to fund fast-growing British technology companies.

According to a Sky News report, Hammond will announce a feasibility study into the use of DC pots to fund patient capital investment opportunities alongside the budget on Monday, 29 October.

The initiative, which will sit alongside the government’s £2.5bn patient capital programme announced in June, will help bolster returns for pension savers while providing additional funding for technology companies with high-growth potential.

Despite this, some in the industry may be wary about the increased risks in places on schemes, while the feasibility study set to examine whether patient capital investment should be a default option, mandatory or for a chunk of each scheme.

The study, likely to be led by the industry, will include representatives from Aviva, HSBC, Legal & General and Tesco, Sky News has reported.

Investments will focus on later-stage capital growth, rather than companies in the early stages.

Commenting on the report, Aegon pensions director Steven Cameron said that while it may well be worth considering, schemes should still consider a diversified approach and have no mandatory requirement to invest.

“People do change jobs and transfer their pensions, meaning schemes need to ensure they also have sufficient liquidity. Patient capital investments may not be priced daily which creates a challenge for schemes in which members can buy and sell units in investment funds daily,” he said.

“The key aim of pension schemes must remain providing an income in retirement to their members, not as a compulsory flow of investments to finance parts of our economy.”

According to Sky’s sources, the working group will look to deliver a cross-industry structure, suggesting the Treasury is looking to implement the idea quickly.

Cameron also suggested that individuals who invest in patient capital could have their pensions lifetime allowance waived, a move that he said would introduce complexity and bias into the system.

“Most people approaching their lifetime allowance will be closer to retirement, meaning liquidity is particularly key if they intend to use their pension to generate an income.

"Furthermore, investment diversification is important for any pension investor, and forcing any pension investments above the lifetime allowance into patient capital could lead to too much concentration in a single asset class.”

    Share Story:

Recent Stories


FREE E-NEWS SIGN UP

Subscribe to our newsletter to receive breaking news and other industry announcements by email.

  Please tick here to confirm you are happy to receive third party promotions from carefully selected partners.


Helping the credit challenged get mortgage ready
A rising number of borrowers are finding it harder to access mortgages due to being credit challenged - whether that’s from historic debts, a county court judgment, or having little to no credit history.

In the latest episode of the Mortgage Insider podcast, Phil Spencer is joined by Eloise Hall, Head of National Accounts at Kensington Mortgages, and Alastair Douglas, CEO of TotallyMoney.


Inside the world of high net worth lending
The mortgage market continues to evolve, and so too does the answer to the question: what is a high net worth individual in today’s market? In this episode of the Mortgage Insider podcast, host Phil Spencer is joined by Stephen Moroukian, Head of Product and Proposition for Real Estate Financing at Barclays Private Bank, and Islay Robinson, founder and CEO of Enness Global. Together, they explore what brokers really need to know when supporting high net worth individuals.

The future of the bridging industry and the Autumn Budget
MoneyAge content editor, Dan McGrath, is joined by head of marketing at Black & White Bridging, Matt Horton, to discuss the bridging industry, the impact of the Autumn Budget and what the future holds for the sector.