The chancellor has announced a £320mn plan to drive innovation and unlock the first tranche of investment from his Mansion House reforms.
A raft of measures – which the government says will provide an extra £1,000 a year for the average person who starts saving at age 18 – will help pension funds invest in "high growth, innovative companies".
The government is supporting new investment vehicles tailored to the needs of pension schemes.
It has also committed £250mn to two successful bidders under the long-term investment for technology and science (LIFTS) initiative, subject to contract.
In a statement on its website this morning (November 21), the government said this will provide over a billion pounds of investment from pension funds and other sources into UK science and technology companies.
Chancellor Jeremy Hunt said: “Innovation is the key to our future success as a nation and its vital that we do all we can to help companies start, scale and grow in the UK.
“Tomorrow’s Autumn Statement will be a huge step towards delivering our Mansion House reforms and unleashing the full potential of our pensions industry.”
The chancellor’s ‘Mansion House’ reform package includes: an agreement between major workplace pension schemes to increase investments in private equity, exploring handing defined benefit (DB) scheme sponsors greater flexibility to access surpluses and proposals to encourage consolidation of small pension pots.
To complement private investment vehicles, a new growth fund will be established within the British Business Bank.
This has been welcomed by eight pension schemes and fund managers as a potentially valuable addition to the market.
Meanwhile, the package also includes measures to further strengthen the UK’s venture capital industry.
A new Venture Capital Fellowship scheme will support the next generation of investors in the VC funds.
It comes as the chancellor is convening representatives from several universities and investors at University College London (UCL) East where they will endorse a new set of ‘best-practice policies’ that are recommended by the review.
The chancellor is also to inject £20mn to foster more ‘spin-out’ companies, firms created using research done in universities.
He is also providing at least £50mn additional funding for the British Business Bank’s ‘Future Fund: Breakthrough’ programme – that will provide direct investment to support these innovative companies to scale up.
The government said spin-out companies raised £5.3bn in investment in 2021-22 alone and today’s announcements are designed to increase investment for the future and help ensure researchers in universities have the tools they need to start, scale, and grow innovative new businesses in the UK.
The independent review – led by Irene Tracey, vice-chancellor of Oxford University and Andrew Williamson, managing partner of Cambridge Innovation Capital – recommended innovation-friendly policies that universities and investors should adopt to make the UK the best place in the world to start a spin-out company.
In the past, spin-outs deals were created from scratch, which has been described as both inefficient and sometimes fails to learn the lessons from previous success stories.
The chancellor has accepted the recommendations and will set out his full response as part of the Autumn Statement tomorrow.
The chancellor’s Mansion House pension reforms were expected to be in the King’s speech earlier this month.
It was expected it would set out the government’s legislative priorities for the next 12 months, of which pensions were expected to be front-and-centre.
However, the speech did not mention any of those areas and while it took many by surprise and left advisers split.
The Financial Times has reported this morning that Hunt is set to unveil reforms to the pension market as part of his Autumn Statement to give British workers a “pot for life”.
This will give a worker the right to nominate the pension scheme that their employer pays contributions to.
sonia.rach@ft.com
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