The Chancellor of the Exchequer will launch his 'Mansion House Reforms' this evening and is expected to announce an ambitious package of measures designed to unlock billions from pension funds to invest in start-ups and other fast-growing companies to make the UK capital markets more attractive.
One of the things Jeremy Hunt is set to announce is the Mansion House Compact, an initiative announced by the Lord Mayor of London, Nicholas Lyons. The purpose of the initiative is to secure better outcomes for UK pension savers through increased investment in unlisted equities.
With some of the UK’s major investment groups and pension funds agreeing to provide around 5% of their investments into early-stage businesses and private equity, the Compact agreement could unlock up to £50 billion into high growth companies by 2030, supporting the development of ‘businesses of the future’ in the UK.
Chancellor of the Exchequer Jeremy Hunt (pictured) said: “British pensioners should benefit from British business success. By unlocking investment, we will boost retirement income by over £1,000 a year for typical earner over the course of their career.
“This also means more investment in our most promising companies, driving growth in the UK.”
The Mansion House Reforms will be guided by the Chancellor’s three golden rules: to secure the best possible outcome for pension savers; to always prioritise a strong and diversified gilt market as we seek to deliver an evolutionary, rather than revolutionary, change in our pensions market; and to strengthen the UK’s position as a leading financial centre to create wealth and fund public services.
To ensure that the money unlocked by these reforms is invested quickly and effectively, the Chancellor has asked the British Business Bank to test proposals to build on the skills and expertise of its commercial arm, which currently has over £15bn of capital mobilised into more than 20,000 companies, and potentially open its pipeline of growth company investment opportunities to pension funds to crowd in more investment.
Responding to the Chancellor’s Mansion House speech, Louis Taylor, CEO, British Business Bank said: “With institutional investors currently only investing a small amount in alternative assets such as venture capital, pension savers may be missing out on opportunities for better returns.
“The British Business Bank fully supports the Chancellor’s request to explore establishing a vehicle that could receive third party capital such as pension fund investment, making use of the Bank’s track record and market access to a range of promising high growth companies.
“This would need to be tested with the market to ensure sufficient appetite, so the Chancellor has asked the British Business Bank to test proposals with industry over the coming months ahead of Autumn Statement.
Confirming its support for the Mansion House Compact, Louis Taylor said: “The British Business Bank supports the Mansion House Compact to enable better long-term retirement outcomes for the UK’s pension savers, which should also provide a legacy of vibrant modern companies for future generations.
“This is an important initiative, which has the potential to unlock billions of pounds of additional investment for the UK’s fastest growing and most innovative companies, while also enabling the UK’s pension savers to benefit from their success and boosting the UK economy.”
