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UK Pension Providers Agree to Increase Investments in Domestic Assets as Chancellor Launches New Ple

In a move to boost investments in the UK economy, major pension providers in the country have agreed to increase their investments in domestic assets.

UK Pension Providers Agree to Increase Investments in Domestic Assets as Chancellor Launches New Ple

Chancellor Jeremy Hunt is set to launch a new pledge called a "compact" to encourage defined contribution (DC) pension providers to utilize pension assets for investments in UK businesses. The Treasury refers to this initiative as a compact, which aims to direct the £3 trillion in UK pension scheme assets towards start-ups, infrastructure, and private equity.

The compact does not specify a mandatory percentage for domestic investments, leaving it flexible for the pension providers. However, some concerns have been raised regarding potential interference with trustees' fiduciary duty. While most providers are expected to sign up as participation is voluntary, at least one provider has chosen not to participate.

Critics of the pledge argue that pushing investments towards UK real assets could contribute to an existing sector bubble. Additionally, the UK's Labour Party has proposed plans that may require pension funds to invest in a £50 billion growth fund, further fueling the debate around pension investments.

This move aligns with previous discussions around increasing investments in the UK economy. In May, the Tony Blair Institute suggested transforming the Pension Protection Fund into a "superfund" to promote higher investments in the country. Current data reveals that the defined contribution pension sector has a significant proportion of high equity investments, with only 8.8% allocated to UK equities.

The pledge to increase investments in domestic assets by UK pension providers reflects ongoing efforts to stimulate the local economy and promote investment in UK businesses. However, the voluntary nature of the compact and concerns raised by some participants highlight the delicate balance between encouraging investment and respecting fiduciary duties. As the initiative unfolds, its impact on the UK economy and the pension industry will become clearer.



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