Speaking in Toronto earlier this week, chancellor Rachel Reeves called on pension funds to learn from the example of their Canadian counterparts by investing more in the UK economy to unlock investment and deliver better returns to savers.
She also said she would “take home lessons” about how consolidation of pension schemes into larger funds could help drive investment in productive assets such as essential infrastructure and high-growth businesses.
“The size of Canadian pension schemes means they can invest far more in productive assets like vital infrastructure than ours do,” she said, ahead of a roundtable with the so-called Maple 8 group of major Canadian retirement funds.
“I want British schemes to learn lessons from the Canadian model and fire up the UK economy, which would deliver better returns for savers and unlock billions of pounds of investment.
“We’re already beginning to see schemes announce plans to invest.
“That’s a vote of confidence in our work to fix the foundations of the economy, rebuild Britain and make every part of our country better off.”
According to Local Pensions Partnership Investments chief investment officer Richard J Tomlinson, the identification of the Maple 8 as a role model was a strong starting point to unlock the “enormous” potential within the local government pension scheme.
“Our own analysis shows that aligning more closely with the Canadian model could deliver an additional £16bn of investment into much-needed UK infrastructure development,” he said.
“This would come, in part, from mirroring the Maple 8’s asset allocations, which tend to favour private markets.
“However, if the chancellor is serious about increasing the flow of pension fund capital to the UK more broadly, we must also see a concerted effort to break down barriers to investment.”
Currently, execution and regulatory risks all too often slowed down or deterred investors, Tomlinson said.
“The government needs to continue on its path to planning reform and consider formal incentives to encourage investment in assets that help pension funds deliver on their primary fiduciary responsibilities to members.”
He also welcomed the chancellor’s indication that greater consolidation of LGPS pools could be on the cards.
“Further consolidation of funds could help remove needless layers of decision-making and allow investment managers to be more agile,” he said.