The Association of Investment Companies (AIC) has written to Treasury minister Torsten Bell MP to urge the government to amend its Pension Schemes Bill. The letter can be viewed here.
The Bill will create powers enabling 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 listed investment companies that invest in these assets.
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “The exclusion of investment companies from the Pension Schemes Bill is unjust and unjustifiable. Investment companies have invested over £110 billion in private assets such as infrastructure, renewables, property, venture capital and private companies – all providing vital capital and helping support UK growth. They are a tried and tested way for all investors, including pension schemes, to access these assets. There is no justification for excluding them from the range of assets pension schemes could invest in. Doing so would be bad for competition, resulting in higher costs and a lower quality offering.
“The Bill’s discrimination against investment companies is inconsistent with the government’s other statements. The recently published Financial Services Growth and Competitiveness Strategy specifically highlights the ‘distinctive advantages of our homegrown investment companies sector’. These supportive words ring hollow when compared with the government’s actions. The issue can be easily resolved by amending the Bill as it passes through Parliament and we are urging the government to do just that.”
Baroness Ros Altmann, a former pensions minister, said: “UK-listed investment companies can be an ideal way for pension funds to invest in long-term, growth-boosting projects. This world-leading sector has many specialist companies with proven, long-standing expertise in managing precisely the types of investment that the Mansion House proposals seek to support. After being hit by flawed regulation in recent years, which the government has sought to remedy, it makes no sense to deliberately exclude closed-ended funds, which are so suitable for less liquid investments. I have serious concerns that relying on open-ended funds like LTAFs risks another Woodford-style scandal in future. The Bill needs to be amended as soon as possible.”
Baroness Bowles of Berkhamsted, a member of the House of Lords Financial Services Regulation Committee, said: “It is absurd to exclude listed investment companies which are a perfect pension investment. Listed investment companies are particularly good at giving access to smaller-scale local infrastructure like schools and hospitals that people will want to know their pensions are supporting.”
