The AIC has asked the government to explain the rationale for the decision to exclude investment companies from the Pension Schemes Bill as the House of Lords begins discussions on the bill at 3.45pm today.
One key measure in the bill will empower the government to compel pension schemes to invest a percentage of their portfolios in private assets. However, as the legislation is currently drafted, pension schemes would not be able to meet this requirement by investing in investment companies.
This is despite investment companies being a long established route to access private markets, with over £100 billion invested in private assets.
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “Given investment companies’ rich experience in investing in private markets, from private equity to infrastructure and renewable energy generation, it is impossible to comprehend why they have been excluded as an option for pension schemes to access private markets.
“We would like to know what the rationale for the decision is, or whether it is based on a misunderstanding. Investment companies provide access to exactly the private markets that the government wants to support, and they give pension funds more choice about how to invest. Yet, as it stands, they are not a permitted option. Why?
“We are not asking for any compulsory investment into investment companies, but simply for them to be a permissible option for pension trustees to consider. We trust the House of Lords Committee will consider this very carefully as their deliberations begin today.”
The decision to exclude investment companies from the Pension Schemes Bill appears to contradict the government’s own Financial Services Growth and Competitiveness Strategy, which said it would “make the UK a world leader for managing private markets assets, leveraging the UK’s position as a leading global venture capital, private equity and private debt centre, as well as the distinctive advantages of our homegrown investment companies sector”.
The House of Lords will begin discussions on the Pension Schemes Bill at 3.45pm today, which can be followed on Parliament TV.
