Pensions Minister Guy Opperman wants to unlock billions of pounds locked in workplace pension funds to fund start-ups and infrastructure projects.
He wants to boost pension growth for workers with money in defined contribution schemes to fund small firms, housing, green energy and sustainable developments.
To do so, he is thinking about tapping in to the money held in employer pensions that has tripled to £60 billion since 2011 following the start of auto-enrolled pensions.
The government is consulting on the idea – which was revealed to delegates at the Trade Union Congress Fit for the Future Pensions Conference.
“Pension schemes could consider opportunities for more innovative, long-term investment offering members the potential for better returns – and the UK economy billions of pounds of funding that can boost jobs, productivity and growth,” said Opperman.
“We can do more to attract new investment into important sectors of the economy which would boost employment and help to build stronger, more sustainable communities. At the same time, this approach would give savers more pride in their pensions while delivering good returns.”
Besides expanding pension investment options, the consultation also reveals:
- the government wants large schemes to clearly state their investment policy
- to demand smaller schemes consider consolidating with a larger scheme every three years
- to change pricing structures
“Pension scheme trustees must always invest to deliver an appropriate return to their members. I am wholly committed to upholding that principle,” added the minister.
“This principle means that pension schemes ought to be thinking about the assets which help diversify and improve returns to beneficiaries.
Consolidation plan slammed
“These same assets also drive new investment in important sectors of the economy – smaller and medium firms, housing, green energy projects and other infrastructure – which deliver the sustainable employment, communities and environments which all of us wish to enjoy.”
The small scheme consolidation plans were slammed by former Pensions Minister Steve Webb, now director of policy at financial firm Royal London.
“Under the plans, once every three years the chair of a pension scheme would have certify that the scheme had considered whether it was acting in the best interests of members by continuing to operate at its existing scale, rather than consolidate into a bigger scheme,” he said.
“But the same Department of Work and Pensions report admits that 80% of small pension schemes fail to comply with the majority of their existing governance requirements, so it is hard to see that adding another one is likely to improve matters.”