Creating ‘GB Savings One’ the UK’s first superfund, is among a
series of new proposals to reform the broken pensions system made
today (Monday, May 29) by the Institute for Global Change
(TBI), as part of its Future of Britain initiative.
Despite the UK having one of the largest pensions markets in the
world, overseas pensions invest 16 times more in British venture
capital and private equity than domestic public and private
pensions do. Both pensioners and the economy have suffered as a
consequence.
In the new paper ‘Investing in the Future: Boosting Savings and
Prosperity for the UK’, TBI Director of Policy Jeegar Kakkad,
Co-Founder and Managing Partner of Ondra Partners Michael Tory
and former Executive Director of the Financial Institutions Group
Martin Madsen set out a simple three- step plan to create a
savings system of half a dozen global-scale savings vehicles in
the order of £300 billion to £500 billion.
Consolidating existing pension funds rather than having lots of
smaller ones so that they are able to invest would secure better
outcomes for UK pensioners and release massive sums to underpin
UK investment in new technologies and infrastructure.
TBI Director of Policy Jeegar Kakkad said:
“We need these reforms to benefit pensioners and light a fire
under the UK economy. The UK’s entrepreneurs and innovators
shouldn’t have to look abroad for the capital to match the
ambition of their ideas.
“By deploying long-term equity to invest in the UK's economic
future these superfunds would help restore the lost vitality of
UK industry. They would ignite the UK’s creativity, innovation,
the energy transition and re-establish London as a global
financial centre.
“They would also give our pensioners the returns they deserve,
lifting returns from being among the poorest in the
industrialised world to among the best.”
Michael Tory, Managing Partner, Ondra Capital, said:
“This is a great country, with an uncommon dynamism and creative
spirit. Today’s proposals would begin the process not only of
establishing the secure savings system its citizens deserve but
also unlocking this unmatched, pent-up energy and talent through
the nation’s first world-class, long time horizon pool of capital
at scale.”
At the heart of the proposals is expanding the Pensions
Protection Fund (PPF). Instead of having to fail in order to
transfer their pension fund, sponsors of the smallest 4,500 UK
defined-benefit (DB) schemes would be offered the voluntary
option of transferring to the PPF on a benefit-preserving basis
to be agreed between the companies and the PPF.
The PPF model would then be replicated and rolled out throughout
the UK in a series of regional, return-generating, not-for-profit
entities that would progressively absorb the UK’s 27,000
defined-contribution funds, the Local Government Pension Schemes,
the remaining DB funds, and, potentially, public-sector pension
schemes, which in most cases are not funded.
The proposed superfunds would be professionally managed,
long-time horizon, diversified funds. Not only would they
generate better, more secure returns for pensioners than the
5,200 existing DB funds, but they would also strengthen pensions
for the entire generation stuck with inadequate provision since
the closure of the DB funds over the past two decades. And they
would reinforce national security by reducing the UK’s dependence
on foreign capital.
In the paper the authors detail how as the PPF is well practiced
at absorbing existing DB pension schemes, the reforms should be
both easy and, subject to the necessary legislative changes,
relatively quick.
The PPF’s essential infrastructure, risk-management systems and
governance has also been in place and consistently proven over
the last nearly 15 years of operation. The fund should therefore
continue to function well on a larger scale supported by a
world-class investment team and infrastructure.
Notes to Editors
The Future of Britain initiative will set out a progressive
policy agenda for a new era of invention and innovation based on
radical-but-practical ideas and genuine reforms that embrace the
tech revolution. The solutions proposed by our experts will
transform public services and deliver a greener, healthier more
prosperous UK.
Investing in the Future: Boosting Savings and Prosperity for the
UK is the first in a series of new proposals.
