Pension market needs ‘culture change’ to unlock startup investment, Phoenix boss warns
The UK pension market needs a “culture change” if waves of retirement cash are to be unleashed into the country’s startups, one of the country’s top chiefs has warned.
Andy Briggs, the boss of FTSE 100 firm Phoenix, said the focus of the defined contribution pension markets was still trained on keeping costs down rather ramping up returns for savers over the long term.
“We have a market defined contribution pensions market, very, very focused on costs. And we think it should be more focused on the customer outcome rather than just cost,” Briggs told City PM in an interview.
“Ultimately the return net of cost is the most important thing and that’s a bit of a change to where the market’s been. That sort of cultural… focus needs to move.”
Lofty costs have long been considered a barrier to getting pension cash flowing into more productive assets via venture capital and private equity funds, where fees are typically higher than in other asset classes.
Ministers have been looking to relax a cap on fees to allow funds to flow more readily into areas like infrastructure and start-ups.
Those pushing for reform in the UK point to examples like Canada and Australia, which pump far more pension capital into private equity and venture capital and reap better returns.
Just nine per cent of pension cash in the UK is invested in so-called productive assets, rather than highly traded stocks and bonds, whereas the next largest pension markets globally average 23 per cent, Briggs added.
Phoenix was among a host of firms to back the recent ‘Mansion House Compact’ drawn up by the chancellor in a bid to get more pension money flowing into startups.
Firms to back the compact have pledged five per cent of their assets into to unlisted companies, with the reforms aiming to unlock up to £75bn of additional investment from defined contribution and local government pensions.