Revamped Article:
Investment selections for UK ventures necessitate enhancement in pension funds for the proposed major agreement to succeed, according to Mercer.
Benoit Hudon, CEO of Mercer UK, has issued a warning to the government: the proposed pensions deal won't deliver growth unless they offer better investment opportunities within the UK. In a candid interview with City AM, Hudon pointed out the need for a stronger pipeline of UK assets to provide acceptable returns for savers.
The Labour government is planning to establish a target for pension funds to invest 5% of their assets in domestic projects by 2030 through the new agreement known as 'Mansion House Compact II'. However, the Mercer UK boss, who manages assets amounting to £648bn, raised doubts about the current investment options, stating, "Our view is there simply isn't a pipeline at the minute to drive good returns for members that are equal or better opportunities available elsewhere when you get to that sort of scale."
To make the new agreement work, Hudon emphasized the importance of a clear investment strategy from Chancellor Reeves. He highlighted that building up private capital investments would require time and there's a "lot of work to be done" in making UK investment opportunities more appealing.
Hudon also encouraged the government to implement tax incentives to ease some of the costs associated with investing in the UK. This, he believed, could boost investment while generating higher returns. The Pensions and Lifetime Savings Association (PLSA) has been leading the charge, advocating for the re-introduction of tax credits on dividend payments made by pension funds on UK share purchases.
The Mercer UK boss has previously served as an advisor to the Canadian government on pension reforms, often seen as a benchmark for Chancellor Reeves. He suggested the UK government could learn from Canada and Australia where mandates on investment levels in local infrastructure are not set. Instead, he believes the best approach would be to offer the right incentives through a robust, healthy pipeline of investment opportunities, possibly combined with tax incentives.
Pensions minister Torsten Bell stated last March that the government is striving to expand the supply of investable propositions. Soon, the government is expected to present its industrial strategy, which will outline a ten-year growth plan for the UK economy. However, the business reforms proposed by Mercer, PLSA, and other organizations might not be a part of the new agreement, with reportedly tense meetings between pension funds and government officials.
In light of this, Hudon's remarks place additional pressure on the government to deliver practical solutions to expand infrastructure projects in the UK. The current Mansion House proposal, which could be revealed as early as next Tuesday, will not force pension funds to invest 5% of assets in UK-based funds, according to industry sources. Nevertheless, there are concerns that the government may resort to "naming and shaming" tactics to force investments.
With 13 pension funds set to sign up to the deal due to a lower entry bar, there are worries that one or more of the original signatories might pull out. Several notable pension providers remain tight-lipped about their potential withdrawal from the pact. Nonetheless, Aviva, in response to the "UK’s supportive policy environment, which is epitomized by the Mansion House Compact," launched a venture capital arm in September last year, illustrating a growing interest in UK investments.
Given the current circumstances, it appears that tax incentives could play a crucial role in shaping the investment landscape for pension funds, potentially driving economic growth by allocating capital to infrastructure projects, innovation hubs, or green energy initiatives. This, in turn, could facilitate stronger returns for savers and a more robust UK economy.
- Benoit Hudon, CEO of Mercer UK, has warned the government that the proposed pensions deal may not generate growth if it doesn't offer better investment opportunities within the UK.
- Hudon emphasized the need for a stronger pipeline of UK assets to provide acceptable returns for savers, stating that therecurrent investment options don't offer equal or better opportunities available elsewhere.
- In order to make the new agreement work, Hudon highlighted the importance of a clear investment strategy from Chancellor Reeves, stating that building up private capital investments would require time and there's a lot of work to be done.
- To boost investment and generate higher returns, Hudon encouraged the government to implement tax incentives, an idea that has been advocated for by the Pensions and Lifetime Savings Association (PLSA).
- Previously, Hudon served as an advisor to the Canadian government on pension reforms, and suggested the UK government could learn from Canada and Australia where mandates on investment levels in local infrastructure are not set.
- The current Mansion House proposal may not force pension funds to invest 5% of assets in UK-based funds, according to industry sources, but Hudon's remarks place additional pressure on the government to deliver practical solutions to expand infrastructure projects in the UK.
- With 13 pension funds set to sign up to the deal due to a lower entry bar, there are worries that one or more of the original signatories might pull out, as several notable pension providers remain tight-lipped about their potential withdrawal from the pact.
- Given the current circumstances, tax incentives could play a crucial role in shaping the investment landscape for pension funds, potentially driving economic growth by allocating capital to infrastructure projects, innovation hubs, or green energy initiatives, and facilitating stronger returns for savers and a more robust UK economy.
