Pensions minister Torsten Bell Photo: © House of Commons/Roger Harris (CC BY 3.0)
Pensions minister Torsten Bell has called for an “acceleration of progress” when it comes to pension scheme investment in faster-growing companies.
Speaking at the City of London Corporation's workplace pensions and UK growth conference today (1 October), Bell said progress was being made on private markets – adding the industry's commitment was already helping to deliver more diverse portfolios and helping to finance the infrastructure, housing, clean energy, and grow businesses that would power future growth.
Despite this, he said allocations were still relatively low – noting "time was short" with 2030, the date by which Mansion House pledges should have been implemented, "practically tomorrow" in pension terms.
He said that, while there had been particular progress in areas such as infrastructure and private debt, there needed to be an "acceleration of progress" when it came to investing in faster-growing companies.
Bell said: "I think we all should agree that there needs to be an acceleration of progress when it comes to investing in faster-growing companies. Public investment matters, but the vast majority of investment in our country is private investment, and that is important."
Most importantly, Bell said "faster-growing companies need to be able to stay within the UK".
During his speech, Bell also commented on the often forgotten role of employers, who built the UK workplace pensions system in the middle of the last century and who retain a key role through auto-enrolment.
He said investment risk may have shifted to employees but noted employers continue to make the decisions that shape the pension outcomes of millions of workers as they are the ones that select work-based pension schemes.
Bell said: "That influence matters. When employers focus solely on cost, the market responds and holds back from investing in productive assets. But when employers focus on long-term value, member outcomes and retirement adequacy, the market responds to that."
The minister said that when employers tender for pension providers, too many place too small a weighting on investment returns – something that was driving a system focussed on the wrong things.
Bell said: "Members want to know their employers have got their back by choosing a pension provider that is focused on driving up returns but I'm afraid that isn't where we are today so I warmly welcome the broad discussion about how we change that over time."
Growth engine
The Lady Mayor of London Dame Susan Langley said there was a shared aim among many in the value chain to connect long-term pension capital with credible British private market opportunities that support economic growth.
Langley said there were "huge opportunities in this area" – noting that workplace pensions could support better retirement outcomes while investing in productive assets, infrastructure, innovative businesses, and long-term growth.
She said: "The right question always has to be, not what is the cheapest, but what really will deliver the best outcome for those retirees, as well as for our UK economy. Pensions should never be seen as a drag on growth; they are an engine on growth, and we need to see that investment in the UK, driving jobs and growth for our economy."
Langley said the City of London Corporation had helped put this issue "firmly on the agenda" with work including the Mansion House Accord, Sterling 20, Employer Pension Pledge and the Employer Pension Playbook, which will be published shortly.
