Pension funds may need a nudge into the stock market after £50bn start-up pledge, says City minister
The government may need to corral top pension funds into investing in London’s stock market as ministers look to solve a dearth of domestic investment into Britain’s big listed firms, the City minister has said.
The calls come after the Chancellor yesterday won a commitment from firms to punt at least five per cent of defined contribution pension cash into start-ups and unlisted firms, with Aviva, L&G, Phoenix and Scottish Widows among the big names to back the plans.
The commitment has been hailed as a “historic turning point” by senior City figures as the move was unveiled in a wider package of measures dubbed the Mansion House Reforms last night.
However, speaking with City A.M. today, the City minister Andrew Griffith said that the government may now need to win a similar commitment from the pension sector to invest in listed firms to solve a slump in investment into the stock market.
“The focus above all else [is] on delivering the best performance for members and everybody wants to make pensioners’ money or long term savers’ money work harder for them,” Griffith told City PM
“That’s not limited to one particular asset class. The compact that the Lord Mayor and the Chancellor have worked on speaks in particular about private [companies], but a lot of the reforms both within the broad area of pensions… should speak to greater opportunities in the UK public markets.”
Griffith said “yes in truth” a conversation was needed to coral more pension fund managers to back listed equities as well as private companies.
Among the wider measures announced by Hunt yesterday were plans to streamline the prospectuses firms are required to draw up for investors before floating. Ministers also said they would accept the recommendations of a new Research Review with the eventual aim of ditching EU era-unbundling rules.
Griffith’s comments today come as top regulators and officials search for ways to get more savers’ cash into the London Stock Exchange after a sustained slide over the past two decades.
Accounting rule changes in 2000 required firms to disclose the deficits of their pension schemes as financial liabilities in their accounts, triggering a major move toward safer bond holdings.
Now just four per cent of the UK stock market is held by pension funds, down from 39 per cent in 2000, according to a new report from think tank New Financial.