Proposed Pension Changes by Jeremy Hunt to invest in UK Start Ups

frugalandsave

What are peoples thoughts about the proposed Pension Changes by Jeremy hunt, to invest 5 % of Peoples Work DC Pension into UK Start Up Companies?

The proposed changes can be read in many articles, like this one in the Guardian: https://www.theguardian.com/business/2023/jul/10/jeremy-hunt-to-unveil-pension-fund-reform-plan-to-help-uk-startups

A Youtuber (Damien Talks Money) asking some concerning questions about this, which made me think. So wanted to see what some experienced folks in this Forum think about this.

GazzaBloom

"From my cold dead hands"

From what I understand it will be 5% of the pension houses default funds and It's not a good deal, the private equity fees will erode any benefits, start-ups are high risk and some money will be lost in ventures that don't pan out. A short sighted, ill conceived idiotic idea from this lame government.

I am not not in a default fund in my pension so he can jog on.

Just my opinion, of course.

prowla

Whenever I hear the words "government" and "pensions" in the same sentence, I know the news is not going to be good.

michaels

I'm trying to think of some positives here beyond my gut reaction of 'govt directing investment' = industrial policy using someone else's money.

I guess in theory people with larger pots do sometimes look at making small cap investments that perhaps default fund managers where the aim is 'try not to be too far below average' would ordinarily steer clear from putting into a mixed portfolio.

Disclaimer: All my funds are in sipps with specific funds selected as part of a strategy.

Sea_Shell

What's a "default" fund, generally?.  As even employers could have "chosen" a fund for their scheme, would they not.

I have an old employer pension with Aviva that I haven't converted to a SIPP yet.

Not sure government should be meddling in this TBH.   It's all quite worrying.

"The Treasury confirmed it had struck an agreement with large pension fund managers, including Aviva, Scottish Widows and Legal & General, that will see 5% of assets in their default pension funds invest in private and high-growth companies."

Albermarle

Sea_Shell said:

What's a "default" fund, generally?.  As even employers could have "chosen" a fund for their scheme, would they not.

I have an old employer pension with Aviva that I haven't converted to a SIPP yet.

Not sure government should be meddling in this TBH.   It's all quite worrying.

"The Treasury confirmed it had struck an agreement with large pension fund managers, including Aviva, Scottish Widows and Legal & General, that will see 5% of assets in their default pension funds invest in private and high-growth companies."

I would think most employers would shy away for any kind of investment picking, and the pension providers default fund would be used. These can vary quite a bit from provider to provider.

I would say that a pension provider nudging a small part of its funds towards more support of smaller UK businesses, is probably a sensible move for the UK economy as a whole.
The UK has suffered a lot in its industrial strategy from short term thinking by the financial sector. 

Prism

Nothing wrong with the concept. I have around 5% invested in private equity trusts and the returns are generally great but volatile. However I think this is more aimed towards venture and growth capital which is even riskier. But my main issue would be government intervention into our personal investments.

Sea_Shell

Albermarle said:

Sea_Shell said:

What's a "default" fund, generally?.  As even employers could have "chosen" a fund for their scheme, would they not.

I have an old employer pension with Aviva that I haven't converted to a SIPP yet.

Not sure government should be meddling in this TBH.   It's all quite worrying.

"The Treasury confirmed it had struck an agreement with large pension fund managers, including Aviva, Scottish Widows and Legal & General, that will see 5% of assets in their default pension funds invest in private and high-growth companies."

I would think most employers would shy away for any kind of investment picking, and the pension providers default fund would be used. These can vary quite a bit from provider to provider.

But if Aviva have, say 5 "default" funds to choose from and your employer chooses fund #4 for their scheme, as it's "middle of the road", is that still a "default" fund?

squirrelpie

Do employers choose funds? At my last place of employment before I retired the investments were decided by the trustees of the pension scheme (or a sub-committee to be accurate). Some of the trustees are nominated by the employer but others are nominated by the employees and pensioners. I thought a key principle of pensions is that they are kept separate from the employer. My father lost a pension before that was the case.

squirrelpie

From the Grauniad article: "While consolidation would be voluntary, any schemes that failed to achieve the “best possible outcome” for its members would be wound up by the pensions regulator and merged with more successful peers."

That sounds like something that's impossible to define precisely. What margin of tolerance will they allow? Is the 'best possible outcome' a theoretical best or the best achieved by some specific pension fund(s)? Over which years?

Sure there should be some regulator that watches pension performance and gives a kick up the pants to those that are clearly poorly performing, but forced mergers? And what if the poor stock selection includes some that are illiquid for whatever reason?

sgx2000

2% fees
20% on returns over 8%

Tories giving £1B to pension funds....

Hahaha....  what a good idea