The financial press this week has seen much coverage of Chancellor Jeremy Hunt’s new initiatives in relation to pensions.
In particular, the new ”Mansion House Compact” which is an agreement signed by nine of the UK’s largest Defined Contribution (DC) pension providers to allocate 5% of assets in their default funds to unlisted equities by 2030.
The Chancellor’s goal here is to raise investments (suggestions are £50 billion) for the UK’s “growth companies” which by their nature tend to be somewhat illiquid.
Chancellor of the Exchequer Jeremy Hunt 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.”
Members of AFPS are reminded that their pensions are not DC but rather they are Defined Benefit (DB) schemes so they will be unaffected by this agreement.
We know, however, that many of our veterans also hold self-invested personal pensions (SIPPs) and these too should be unaffected by the agreement (unless of course they wish to participate and invest in these default funds).
There were some proposals that will impact the funding mechanisms for some DB schemes, but again most public service schemes (including AFPS but notably excluding Local Government Pension Schemes – LGPS) remain unaffected as they are almost all “unfunded” (ie they operate on a Pay as You Go basis with current employer and employee contributions being used to pay today’s pensioners).
The Government has said:
”To improve outcomes for savers in a highly fragmented market, with over 5,000 Defined Benefit Schemes, the Government will set out its plans on introducing a permanent superfund regulatory regime to provide sponsoring employers and trustees with a new way of managing Defined Benefit liabilities.”
For further reading on this topic see: Chancellor’s Mansion House Reforms to boost typical pension by over £1,000 a year
