London (Parliament Politics Magzine) – Two of the biggest City firms have joined forces to fund as much as £20bn of pension finances in fast-growing UK businesses such as green energy, after government reforms created to increase returns for savers and the British economy.
How Will the £20 Billion Fund Boost UK Businesses?
Phoenix Group, the country’s biggest savings and retirement business, and Schroders, the investment manager, reported the launch of a joint venture to push pension money into high-growth businesses which are not listed on the stock market.
What Is the Goal of the Future Growth Capital Initiative?
Seeking to deploy between £10bn-20bn into private markets over the next decade, the investment vehicle, Future Growth Capital, seeks to build on former chancellor Jeremy Hunt’s “Mansion House compact,” a contract reached last year to get the UK’s biggest pension fund managers to invest in fast-growing businesses. Hunt’s contract with City firms aimed to boost pension fund investment in unregistered assets, which can be riskier than publicly mentioned assets but can deliver higher returns for savers. Alongside securing more money for retirees, the purpose was to support smaller UK companies to drive up economic growth.
How Does the New Fund Support Green Energy Projects?
The fund is designed to invest in private firms, including green energy, windfarms and solar, property and small businesses. While there are approximately 1,900 companies listed on the London Stock Exchange, there are nearly 36,000 medium-sized firms in Britain.
The plans are broadly endorsed by Labour, which is also concentrated on driving up private investment in the UK economy. The chancellor, Rachel Reeves, stated she welcomed the two FTSE 100 companies’ announcement. “We want pension fund money to work harder for people and the economy. That’s why our pensions review will explore how we can unlock even more investment in the UK economy while boosting pension pots.”
Why Are Phoenix Group and Schroders Collaborating on This Investment?
Future Growth Capital will establish an initial £1bn in pension money earmarked by Phoenix Group, which will be collected in partnership with Schroders, with programs for the pensions and insurance company to allocate up to £2.5bn over three years. It will support in the UK and globally. Phoenix Group plans to invest 5% of its suitable savings products on behalf of policyholders, worth around £50bn from limited contribution pensions pots, where unregistered assets could deliver better returns than traditional equity investments.
Andy Briggs, the chief executive of Phoenix Group, stated: “Pensions savers in the UK had received lower returns than their counterparts in countries including Australia and Canada, partly because they allocated less money to private assets than other similar developed economies. “By forming Future Growth Capital with Schroders, it will help us to deliver our goal of giving UK long-term savers a way to invest in a more diversified portfolio with the potential for higher returns, from a broader range of assets.”
Peter Harrison, the chief executive of Schroders, stated: “By connecting long-term savers with our country’s most inventive companies, Future Growth Capital will help more people to fund a secure and comfortable retirement, whilst supporting businesses to grow and thrive right here in the UK.”