Raising investment levels

For greater prosperity and growth, the UK needs higher long-term returns for savers and more investment in its firms and infrastructure to create high quality jobs. The UK’s FPS firms are leaders in providing capital to firms and projects globally.

Deploying this expertise more consistently at home will pay dividends. It has the potential to improve returns for long-term savers, provide capital for businesses to pursue new opportunities, and create compelling investment options for international investors.

Big move #2: fully implement a programme of change for UK pension and insurance funds. These reforms will benefit long-term savers while also supporting growth companies, infrastructure, and the wider economy. Government should progress the reforms for which there is strong and broad ranging support. This includes Solvency II reform and a new Value for Money framework for defined contributions (DC) schemes.

Government has indicated that up to £75bn in private capital could be unlocked by 2030 if Local Government Pension Schemes (LGPS) increase their allocation to unlisted equities to 10% (which the government is consulting on at time of publication), and if UK DC schemes allocate at least 5% of their default funds to unlisted equities. Reforms to Solvency II could potentially unlock £100bn from the insurance and long-term savings sector over the coming decade from 2024. Capital will only flow if these regulatory reforms are accompanied by profound cultural change. In addition, there will need to be a significant increase in savings levels into DC retirement schemes.

Big move #3: maximise the effectiveness of every pound of government support for growth companies. Government deploys financial support across the economy, nationally and locally. Clarifying how these disparate funding schemes align to major strategic outcomes would provide strong signalling.

The clearer the priorities, the greater the chance of leveraging in private capital. Operationally, firms also find it difficult to navigate the opportunities. This could be made much more user-friendly with a “product and institution-neutral” advisory team and portal that would help firms navigate the choices available to them. There is also an opportunity to explore creating investment vehicles that could provide a destination for long-term capital.