Analysis-Britain’s growth bet on pension pots a long haul task

investing.com:

By Huw Jones and Carolyn Cohn

LONDON (Reuters) — Britain's plans for nudging billions of pounds of pension cash into new UK companies to boost growth and increase stock market listings leave challenges of keeping investor fees competitive and finding enough funds.

Under the so-called «Mansion House Compact» announced in July by finance minister Jeremy Hunt, 10 companies have volunteered to invest 5% of their direct contribution (DC) pension pots, or about 50 billion pounds ($62.31 billion) in total, by 2030 in companies listed on the LSE's junior AIM market, rival Aquis Exchange, or not listed at all to help them grow.

Hunt on Wednesday announced his first steps to help implement the compact, including a new fund set up by the British Business Bank for pension schemes to invest in growth companies. Such a pooled approach is aimed at small schemes that lack expertise to research fledgling companies.

«The best way to achieve the important task of divesting asset allocation of DC funds into small growth companies and unlisted equity is to put together a range of funds specially designed for collective investment,» said Ros Altmann, a former UK pensions minister.

The government's cocktail of measures could take time to make a measurable difference, however, given the uphill task in a fragmented sector where consolidation has barely begun.

Investments from direct benefit (DB) pension schemes, one of the largest parts of the sector, in UK listed companies have dropped from 48% in 2000 to just 6% by 2020, or nearly 2 trillion pounds, with cash redirected to less risky government bonds and heavily traded global blue chip stocks, according to New Financial think tank.

This has shrank London as a listings centre just as it faces