You are here: Home - Investing - Experienced Investor - News -

Johnson calls for investment ‘big bang’ to drive UK recovery

Written by: Emma Lunn
Boris Johnson and Rishi Sunak are calling for British pension funds to plough more retirement savers’ cash into UK assets to boost Britain’s long-term growth.

The prime minister and chancellor have written an open letter to the investment industry in which they urged UK institutional investors to invest a greater proportion of their capital in long-term UK assets such as pioneering firms and infrastructure. The letter comes ahead of the Investment Summit in Downing Street in October.

The two ministers believe that now is the time to “unlock the hundreds of billions of pounds” sitting in UK institutional investors and help drive the UK’s recovery from the pandemic.

The letter, co-signed by the prime minister and chancellor, said: “It’s time we recognised the quality that other countries see in the UK, and back ourselves by investing more money into the companies and infrastructure that will drive growth and prosperity across our country….

“…we want to see UK pension savers benefitting from the fruits of UK ingenuity and enterprise, being given the opportunity to back British success stories, and secure higher returns and better retirements.”

The letter argues that UK assets are overlooked by domestic investors while pension funds, based in Canada and Australia have been active in backing UK infrastructure projects which have provided a long-term income for their investors.

The letter also pointed out that more than 80% of UK defined contribution pension funds’ investments are in mostly listed securities, which represent only 20% of the UK’s assets.

This challenge to investment companies comes alongside the action the government is already taking to remove obstacles to long-term illiquid investment within the UK, by setting up the UK Infrastructure Bank and introducing flexibilities into the cap on fees that defined contribution pension schemes can charge.

The government says it is also working closely with regulators to ensure a supportive regulatory environment.

Laith Khalaf, head of investment analysis at AJ Bell, pointed out that DIY investors can already gain access to illiquid assets like private equity, infrastructure and real estate within their SIPPs and ISAs.

He said: “Investment trusts offer investors access to these hard to reach areas of investment markets, because their closed-ended structure means they don’t have to sell underlying investments to meet investor withdrawals. The cost of that liquidity is reflected in the premium or discount the investment trust is trading at, which adds to the volatility of the investment. This is an area where investors do need to tread with caution, and should only have a small part of their portfolio invested, and be comfortable with the risks involved.

“Investors can also invest in small unquoted companies through VCTs and EIS, while capturing valuable tax breaks. These are high risk investments only suitable for the most adventurous investors, and must be held for the long term in order to qualify for the relief that is paid up front.”

Becky O’Connor, head of pensions and savings at Interactive Investor, said: “Pension savers might feel dubious about their money being used to support a UK recovery and be wondering whether this will compromise their life savings. It absolutely shouldn’t. We need to build back better and people also need bigger retirement pots and the two things can go hand-in-hand. Some institutional investors are doing this already.

“The primary duty of pension fund managers remains to deliver a good return to customers so they can retire with a decent income. This can be achieved through the kind of investments the government is suggesting, such as green infrastructure. A win-win is possible over the long term. But it can be easier to make the wrong decisions with other people’s money, too.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Autumn Statement: Everything you need to know at a glance

Yesterday Chancellor Jeremy Hunt made his first fiscal statement in the role, outlining a range of tax measure...

End of Help to Buy: 10 alternatives for first-time buyers

The deadline for Help to Buy Equity Loan applications passed on 31 October. If you’re a first-time buyer who...

Moving to an energy prepayment meter: Everything you need to know

As households struggle with the soaring cost of energy, tens of thousands of billpayers are expected to move o...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week