Pension giant plots launch of superfund to back UK
Boost for the Chancellor as Phoenix plans to support fast-growing companies to lift returns for savers
BRITAIN’S biggest long-term savings and retirement business is drawing up plans to launch a new superfund to back fast-growing companies in a boost for Jeremy Hunt.
Phoenix, which owns insurer Standard Life, is in the early stages of creating a multibillion-pound investment vehicle that insiders say will help turbocharge investment in highgrowth sectors and lift pension returns.
This includes pooling cash to invest in life sciences and fintech businesses, as well as injecting long-term venture capital into unlisted companies in the UK and overseas.
The fund, which is expected to launch this year, will also help the FTSE 100 company to meet a goal of investing at least 5pc of its defined contribution (DC) workplace pension assets in unlisted companies by 2030.
It is understood that Phoenix, which has more than £280bn of total assets under management and 12m customers, currently has less than 1pc of the relevant cash invested in these assets.
This means it needs to plough billions of pounds more into investments such as science and technology over the next five years, which stems from the Chancellor’s Mansion House reforms unveiled last summer. The fund will also enable thousands of smaller pension funds to gain access to venture capital and high-growth companies by contributing to the investment vehicle.
Smaller funds traditionally do not have the financial firepower to tap into these investments because of the higher costs charged by venture capital firms.
However, by handing over cash to the Phoenix fund, it is possible that even the smallest of Britain’s 27,000 workplace pension schemes will have access to these investments.
This idea has been partly inspired by similar investment funds in Australia, such as IFM which specialises in infrastructure investments.
Mr Hunt has announced he wants to boost returns for savers while directing more cash to productive, higher-returning assets under plans first announced in last year’s Mansion House speech. He claimed the reforms could boost individual pension pots by up to £1,000.
However, some pension funds openly warned the Chancellor against mandating Uk-based investment, which they say could reduce investor returns.
Phoenix is said to be aiming for about 40pc of Uk-focused investment as part of its Mansion House commitment but sources suggested this was not a target and the focus would be on returns over location.
Britain’s largest local government pension scheme is also understood to be plotting a new Uk-focused fund as part of a new £2bn investment drive into private markets.
Border to Coast, which manages the pension pots of local government workers from Bedfordshire to Teesside, will invest hundreds of millions of pounds of this pot into UK infrastructure, private equity, and private credit over the next year. This will be achieved through a new UK Opportunities fund focusing on British assets. Border to Coast has just under £60bn in assets. Its new fund will target projects including housing, transport, and renewable energy, all of which money managers said would benefit UK communities.
The Chancellor also used his March Budget to force asset funds to disclose how much of savers’ money is invested in Britain, as he seeks to drive more domestic investment.
Poorly performing funds will also be blocked from taking on new business from workplace pension schemes under the plans.
Andy Briggs, the boss of Phoenix, has warned that British pensioners are not saving enough for retirement.
Mr Briggs told The Telegraph: “The state pension just can’t cope in the way that it was originally designed to do. Effectively, state pensions are going to have to be paid later and at a lower level, and people are going to have to make greater personal provision.” A Phoenix spokesman declined to comment.
£2bn The investment drive into private markets planned by the largest local government pension scheme, Border to Coast