Broadstone has responded to the Government’s Pensions Investment Review, ‘Unlocking the UK pensions market for growth.’ Its response comments that while the focus on productive finance must be framed as providing a clear benefit for scheme members, the evidence is not clear that this is the case with the Government Actuary Department’s own modelling showing only marginal benefit.
The response also argues for greater detail on how the objective of productive finance is to be achieved by the Government’s proposals. For example, clarity on how a larger scheme of £25bn is more likely to invest in productive finance than, say, a scheme of £10bn.
Currently, there is concern that the £25bn target is too large and feels arbitrary with little evidence to support its purported benefits. While a lower number of providers would be of benefit, there is careful balance to be struck so as not to upset a competitive market and innovation that members benefit from.
Broadstone argues that the Government’s immediate focus should be on creating products that are compelling for investment via tax breaks, first loss protection or other downside protection, clear societal value and low cost to avoid the erosion of value.
David Brooks, Head of Policy at Broadstone, commented: “The Government is aiming to leverage the capital tied up within the pension system to achieve its growth ambitions. It is evident why it is prioritising this mission given the rocky start to the year for the UK economy and knock-on consequences for the nation’s standard of living.
“However, while its aims are understandable, there are areas which need far more detail. It is absolutely critical that any reforms provide a clear benefit for members and the evidence from the Government itself does not offer that reassurance.
“The focus, instead, should be on the creation of the products needed to stimulate greater investment from pension funds of all sizes into the UK economy. If the products and benefits can exist then, whether a scheme has £5bn or £50bn in assets, the allocation would be made.”
“We are also concerned about the potential impact on pseudo-master trust schemes and believe there should be an exemption for those schemes to continue to provide value for their members.”
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