The SPP paper acknowledges the need for increased pension scheme investment in Productive Finance assets as well as concerns that this could have potentially negative consequences for savers if not carefully implemented.
The paper goes on to broadly identify the barriers to success, which include the absence of a consistent definition of either UK investment or Productive Finance as well as legislative and regulatory barriers.
The SPP paper also details a wide range of possible solutions:
Defined Benefit (DB) schemes
With regard to DB pension schemes, this includes legislative change for surplus sharing, increasing the protection offered by the Pension Protection Fund (PPF), freeing up PPF reserves for investment in productive finance assets and a government guarantee for DB schemes that allocate to such assets.
Local Government Pension Scheme (LGPS)
The idea of government compelling the LGPS to invest a specific proportion of scheme assets in UK productive finance is examined and the possibility of transitioning unfunded public sector occupational pension schemes to a funded model is acknowledged.
Defined Contribution (DC) schemes
The idea of policymakers introducing a new freestanding duty on trustees to include certain minimum asset holdings investments is explored in detail. Addressing the issue of costs, including a review of the Charge Cap, is also mentioned. With regard to investment considerations, consolidation is noted as being likely to help whilst Long-Term Asset Funds (LTAFs) are suggested as potentially being part of the solution.
Additional solutions
Other potential solutions highlighted in the paper include tax incentives, a productive finance gilt and the utilisation of CDC pension schemes.
SPP President Sophia Singleton, said: “This latest SPP paper, Solving the UK Investment Puzzle, identifies numerous barriers to success but more importantly also details a wide range of potential solutions to these problems.
As the Government continues its Pensions Investment review and their Call for Evidence concludes, this paper should prove to be a useful starting point for government and industry to achieve an outcome that best serves the interests of all involved parties – policymakers, the UK economy and, perhaps most importantly, savers.”
SPP paper on “Solving the UK Investment Puzzle.”
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