The Association of Investment Companies has again appealed to the government to amend its pension schemes bill in the House of Lords as time runs out to prevent the exclusion of London-listed closed-end funds.
The bill, which has passed through the House of Commons, will give the government power to compel pension schemes to invest some of their members’ savings in private assets, such as infrastructure, property and start-up companies.
That is in case 17 of the largest workplace pensions fail to meet their commitment under the Mansion House agreement to invest at least 10% of assets in private markets by 2030, with half of that in the UK.
However, the current draft of the bill explicitly rules out using UK-listed closed-end investment companies, 294 of which are AIC members with total assets of £267bn.
In July the trade body urged the government to remove the “unjust and unjustifiable” exclusion, but to no avail.
AIC chief executive Richard Stone said: “It is very frustrating that the government did not amend the pension schemes bill when it passed through the House of Commons.”
The AIC does not advocate pension funds being compelled to invest in private assets but argues investment companies should be an option if the government adopts this power.
“Excluding investment companies would be bad for competition, resulting in higher costs and a lower quality offering for pension savers,” he said.
“Investment companies have invested over £110bn in private assets such as infrastructure, renewables, property, venture capital and private companies – all providing vital capital and helping support UK growth,” Stone added.
Baroness Ros Altmann, a former pensions minister who is among a band of investment company champions in the House of Lords, earlier this month challenged Lord Spencer Livermore, financial secretary to the Treasury, why line 41 on page 26 of the bill ruled out using listed closed-end investment companies to fulfil the Mansion House intent on compulsion.
In reply, Lord Livermore recognised the “important role that investment companies play in providing access to private markets” but added that the government wanted to ensure that its reserve powers to compel pension schemes were “suitably targeted and contain guardrails”.
