- New rules for employer referrals
- FCA, Pensions Regulator gain powers
- Encourages investment in UK companies
New government initiatives will require pension funds to disclose the proportion of shareholder funds allocated to British enterprises.
Assisting investors in making “informed decisions,” the funds will additionally be obligated to contrast workplace pension performance data with their rivals publicly.
Recent years have seen an influx of additional funds into employment pensions due to the implementation of automatic enrollment.
The government estimates that 2022 savers contributed £116 billion, an increase from the £90 billion deposited a decade prior.
Chancellor Jeremy Hunt has introduced the plans pertaining to defined contribution schemes, which will require pension funds to disclose their costs, net investment returns, and investment levels in British firms by 2027.
They must conduct a performance data comparison with rival schemes, which must consist of a minimum of two schemes overseeing £10 billion in assets.
Boosting UK Economy Through Pensions
According to a government statement, employer referrals for new business will only be permitted for schemes that perform adequately for savers.
In such a scenario, the Financial Conduct Authority and the Pensions Regulator will be granted expanded jurisdiction over interventions.
The FCA has yet to conduct a consultation on the proposed plans, which are an expansion of the Mansion House compact established by the government to encourage pension funds to allocate a minimum of 5% of their assets towards unlisted equity.
These new rules enable employers and savers to see how their money is invested and how the returns compare to other schemes,” said Chancellor Jeremy Hunt.
In contrast to their international counterparts, British pension funds make a smaller contribution to the UK economy due to their reduced investment in domestic enterprises.
“By imposing these requirements, efforts will be directed towards enhancing savers’ overall returns and outcomes.”
The Capital Markets Industry Taskforce Chair and chief executive officer of London Stock Exchange plc, Julia Hoggett, further stated, “Pension holders should be aware of the amount invested in equities on their domestic market.
“Investing in United Kingdom-based companies ultimately contributes to the prosperity of those companies and the returns they generate, thereby bolstering the economy and the nation where pension holders reside. This is in the best interest of all parties involved.”
Pension companies oppose proposals
However, pension firms resisted the reforms, arguing that the increased investment pressure on British firms could lead to unfavorable consequences for investors.
James Carter, director of platform policy at Fidelity International, stated, “The Government has reaffirmed its overarching objective to encourage investment in UK markets as part of today’s announcement.
“Unlock your financial potential with free Webull shares in the UK.”
Although increased transparency regarding the allocation of funds to domestic assets could facilitate this, defined contribution pension schemes must retain the autonomy to pursue the most beneficial approach for their members.
Jon Greer, head of retirement policy at wealth management firm Quilter, further stated, “While the Chancellor’s reforms to pension funds are intended to assist British businesses and the economy as a whole, they present the workplace pension industry with some challenges.”
“While the new disclosure requirements will increase accountability and transparency, they will also require pension funds to justify their asset allocation decisions.”
There will be a delicate balance that the Chancellor must maintain between promoting investment in the United Kingdom’s economy and safeguarding pension funds against unreasonable costs or risks.
