An overhaul of Britain’s pensions system could provide vital funding for the country’s fledgling tech companies and provide better returns for pensioners, two industry heavyweights have claimed.
Nausicaa Delfas, the new head of TPR, Britain’s workplace pensions regulator, told an industry conference that pensions schemes need to innovate to provide returns and not just be focused on low costs.
“We need to do this so that pensions deliver a pot that enables savers to have confidence, empowerment and security in later life.
Delfas said there is a “lack of innovation and fluidity in the market”, which is leading to investment risks.
“We want the industry to change its mindset. From prioritising low costs to putting value first. And by doing so to drive innovation in the interests of savers,” she added.
In an article in the Telegraph, meanwhile, Sir Nigel Wilson, Legal & General’s boss, repeated his call that pension funds pulling out of equity markets had crippled tech development in the UK.
Innovation in universities was “off the scale” he said but pension fund holding in stocks was now down to just 4% of their assets compared to 53% in 1997.
Wilson blamed a tax raid on pension funds in 2000 by then chancellor Gordon Brown and changes to accounting rules to avoid scandals such as the Robert Maxwell pension grab.
“De-equitisation is a massive concern for the UK economy. The history of it starts with Maxwell and the change of the accounting standards in 2000 and ends with Gordon Brown taxing dividends,” he said.
“Those events collectively really reduced the risk appetite and increased the regulatory oversight on the UK pension industry in a fairly profound way.
"In one sense, we are a science superpower because we win tons of Nobel Prizes.
“There’s no doubt about the intellectual capability. But it's very hard to see the commercial outcomes of that great intellectual capability.
“We missed the technology bubble in 2000 when a lot of the great companies of today were formed and have scaled up. America has ended up with a huge amount of scaled-up businesses and we haven't had any.”
Chancellor Jeremy Hunt is said to be working on reforms to the way UK pension funds invest, including possibly forced consolidation of the huge number of direct contribution funds to create powerhouses more akin to Canada’s giant Pension Plan Investment Board and the AustralianSuperFund.