The boss of Britain’s biggest money manager has warned Rachel Reeves not to force pension funds to invest in UK assets in her hunt for elusive growth.
Antonio Simoes, chief executive of Legal & General, which overseas £1.1 trillion of savers’ cash, told The Mail on Sunday that the Chancellor needed to focus on ‘creating the right conditions’ that would ‘encourage’ funds to back the British economy.
‘We’re following what customers want, what clients and savers want,’ he said.
‘I don’t think we should cross the line of mandating it. I think it’s more about creating the right ecosystem so that it happens naturally.’
In an interview two months ago, the Chancellor said ‘never say never’ when asked about mandating pension funds to allocate money to UK assets.
‘I think we need to let the market operate,’ Simoes added, saying of investing in the UK: ‘It’s about encouraging people, rather than using some reserve power to mandate it.’
L&G is one of the signatories to the Mansion House accords, a voluntary pledge by money managers to invest at least 10 per cent of their pension funds into private markets by 2030, with at least 5 per cent earmarked for the UK.
‘I am absolutely aligned with the Government’s ambition to promote growth in the UK,’ Simoes said, adding that Labour needed to push ahead with ‘supply side reforms’ including the planning and infrastructure bill, which is designed to make it easier to approve building projects.
But there are fears the Government will order pension funds to go further under laws working their way through Parliament.
The Pension Schemes Bill, if passed, will give regulators the power to force workplace pension schemes to invest more in British assets.
Critics, including former pensions minister Sir Steve Webb, have warned the proposed law would create ‘instability and uncertainty’ for pension schemes.
Simoes’ plea for restraint came as he reiterated calls for the UK to encourage people to start saving more towards their retirement.
The L&G boss previously called on the Government to lower the age of auto-enrolment in workplace schemes to 18 from 22, saying it would boost the economy now and reduce dependency on state benefits in future.
Last month, Work and Pensions Secretary Liz Kendall announced a review of the state pension age, which is already set to rise from 66 to 67 before 2028.
The Government’s official forecaster has warned that the public finances are on an unsustainable path due to an ageing population.
The Office for Budget Responsibility reckons that even just the cost of the ‘triple lock’ on the state pension – pegging it to the higher of inflation, earnings growth or 2.5 per cent – is set to reach £15.5 billion a year by 2030 – three times more than its original estimate.
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