Budget 2021: Govt to reform investment rules for pension schemes

Budget 2021: Govt to reform investment rules for pension schemes

The government has announced a consultation into investment rules for pension schemes to support the economy post-Covid.

Delivering the 2021 Budget, Rishi Sunak today (March 3) said the government was "taking steps to give the pensions industry more flexibility to unlock billions of pounds from pension funds into innovative new ventures".

He said Lord Hill has led a "landmark review" in this area, and that the Financial Conduct Authority will be consulting on this matter "very shortly".

According to the budget documents, this consultation will analyse whether certain costs within the charge cap, set at 0.75 per cent, affect pension schemes’ ability to invest in a broader range of assets.

The goal is to ensure that pensions schemes are not discouraged from such investments and are able to offer the "highest possible return for savers".

Additionally, the Department for Work and Pensions will come forward with draft regulations to make it easier for schemes to take up these opportunities within the charge cap by smoothing certain performance fees in a multi-year period.

FTAdviser's sister publication Pensions Expert has reported previously on the call, by Bank of England governor Andrew Bailey, for defined contribution schemes in particular to be conscripted into the post-pandemic rebuild of the economy.

Experts have warned, however, that regulatory hurdles must be overcome if DC pots are to invest freely in illiquid asset classes.

Peter Glancy, head of policy, pensions and investments at Scottish Widows, said "by allowing pension funds to invest in the redevelopment of the country’s infrastructure and economic initiatives, trillions of pounds invested in UK pensions could provide a much needed boost as Britain looks to bounce back from Covid-19.

"This could also be great news for pension savers, whose pension pots would benefit from the returns on these investments in the long run. We await the FCA consultation promised today by the chancellor.”

maria.espadinha@ft.com, additional reporting by Ruth Gillbe

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