Government wants to alchemise nationalistic fervour into a building campaign paid for by pension funds.

The result would help turbo-charge an economy bashed by Brexit and the coronavirus pandemic, but these plans are being rebuffed by some in the institutional pension sector as too risky for retirement funds. 

In an open letter to the pension sector the Prime Minister and the Chancellor have called on the UK’s institutional investors to “seize the moment for a ‘Investment Big Bang’ to boost Britain’s long-term growth”, by investing in long-term illiquid UK assets like infrastructure and private equity, backed by £10bn of guarantees provided by the state via a new UK Infrastructure Bank.

Fund management firms have largely welcomed the intervention. 

But Steve Webb, partner at actuary LCP and a former pension minister, echoing wider industry concerns, said: “Pension trustees have a primary responsibility to the interests of their members and this duty cannot be overridden by exhortations from the government of the day.” 

A key barrier is often finding suitable projects where a lot of the risk has already been overcome, he added.

Plans to liberalise institutional pension investing, in motion since 2019, are now part of the government’s post-Brexit, post-Covid, ‘Build Back Better’ pivoting. 

By including references to environmentally-conscious investments it also buttresses the UK hosting of the 26th UN Climate Change Conference of the Parties (COP26) this Autumn. “We want to see UK pension savers benefitting from the fruits of UK ingenuity and enterprise,” the government’s open letter read.

Tom Selby, head of retirement policy at AJ Bell, said the move comes with “more than a whiff of patriotic fervour”, but was sceptical of its success: “Just because the PM and Chancellor click their fingers doesn’t mean pension investors will flock to illiquid UK investments in their droves."

You can read more ICAEW coverage on this topic here: Can pensions really be the foundations of building back after the pandemic?