The Tony Blair Institute offers “radical” pension funds in the UK

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Tens of thousands of public and private sector pension plans would be bundled into ‘British superfunds’ with assets of up to £500bn each under ‘huge radical’ proposals to free up tens of billions for UK business growth .

The measures outlined in a Tony Blair Institute report aim to reverse years of capital market declines through the creation of large pension funds, similar in size to those in Canada and Australia.

He found that although the UK had one of the biggest pensions markets around the world, overseas pensions invest 16 times more in UK venture capital and private equity than domestic public and private pensions.

“Both retirees and the economy have suffered as a result,” the report, Investing in the future: boosting savings and prosperity for the UK, She said.

“We need these reforms to benefit retirees and light a fire in the UK economy,” said Jeegar Kakkad, TBI policy director. “UK entrepreneurs and innovators should not look abroad for capital to fulfill the ambition of their ideas.”

The TBI’s proposals would see the Pension Protection Fund, the UK’s £39bn lifeboat scheme for company pension schemes, take on a much larger role as a consolidator of funds, a move that would require a change in legislation.

Instead of having to fail to transfer to company pension To fund the PPF, employers sponsoring Britain’s smallest 4,500 defined benefit (DB) or final salary schemes could choose to join the PPF on a benefit retention basis, with tax incentives to do so, the report said.

This new £400bn fund, dubbed GB Savings One, could invest up to £100bn in UK infrastructure, businesses and start-ups, according to the document.

The PPF model would then be rolled out across the UK in a range of regional non-profit funds ranging in size from £300bn to £500bn. These would progressively absorb the UK’s 27,000 DB funds, local government pension schemes, remaining DB funds and possibly public sector pension schemes, which the newspaper described as “potentially the biggest premium”.

The report said these superfunds would generate “better and safer” returns for millions of retirees than the 5,200 existing DB funds and would also bolster pensions for “the entire generation locked in inadequate provisioning” since the closure of DB funds over the past two decades.

The Pensions and Lifetime Savings Association, the voice of 1,300 workplace pension schemes serving 30 million savers, said the paper had “some extremely radical but also extremely impractical ways” of encouraging pension funds and insurers to life to invest in the UK.

“There are much simpler and quicker solutions,” said Nigel Peaple, PLSA’s director of policy and defence. “The government and the pensions industry are already working intensively together on these issues and, provided they always put savers’ interests first, should lead to better outcomes for all.”

Mick McAteer, co-founder of the Financial Inclusion Center and former board member of the Financial Conduct Authority, said the UK lacks collective risk-sharing arrangements that could allow an approach on the scale suggested in the paper to work.

The TBI’s proposals come as pensions have become an area of ​​growing political interest ahead of next year’s general election. A remodeling of the PPF it is one of several options being considered by Jeremy Hunt, chancellor, as he looks for ways to unlock billions of sources of private pension capital to boost business in the UK.

Rachel Reeves of the Labor Party, the shadow chancellor, he did not rule forcing pension funds to invest in areas that help economic growth.