Mansion House: UK giants to agree to pick high-return pension schemes
UK giants Tesco and NatWest Group are set to answer Canada Lord Mayor’s calls to focus on driving returns rather than getting bogged down by fee costs when picking pension schemes for employees.
Ahead of the Mansion House speech on Tuesday, the Lord Mayor criticsed UK companies for choosing providers that charged lower fees over more expensive managers who took more risks.
In a new “employers pension pledge”, Tesco and over several other major companies are set to agree to focus on net returns rather than costs when defined contribution (DC) pension providers are chosen.
Writing for City PM, the Lord King said he had urged the UK’s biggest employers to “prioritise long-term investment value over headline costs”.
“The significance of my pitch has been its simplicity: a plea to focus on net returns, push for transparency in private market allocations and value for money – that unlocks growth.”
In an interview with the Financial Times, Alastair King criticised firms for choosing low-cost pension schemes.
“We’ve ended up with pension pots that have lots of equity trackers and lots of fixed income because it’s a cheap way of doing it,” he said.
King said pension scheme providers that charged more were more adept to investing in infrastructure, private debt and start-ups, allowing them to drive “supernormal returns which is what this whole thing is about”.
The companies signing up to the declaration are: Aberdeen Group, Aviva, BT, Canada Life UK, First Group, Goldman Sachs, Legal and General, London Stock Exchange Plc, M&G, Nationwide Building Society, NatWest Group, Octopus Energy, Octopus Investments, Phoenix Group, Samworth Brothers, Santander, Schroders, Standard Chartered, Tata Steel UK, and Tesco.
Pension reforms key to Mansion House package
The Lord King has championed efforts to get City firms to take on more risks in order to make the UK more competitive.
The Mansion House speech will lay out a number of reforms to “rip up” red tape stifling growth, with Chancellor Rachel Reeves expected to detail how the next phase of the government’s pensions review will focus on the adequacy of retirement savings.
Reeves has already struck an agreement with 17 pension funds that will see them look to invest around five per cent of assets domestically by 2030.
Matching fintechs with investors will also be a key initiative introduced in the Mansion House package as part of a wider strategy to grow start-ups in the City, City PM understands.