On the go: The Pensions Regulator has dropped controversial plans to limit the amount funds can put into illiquid assets after the government urged trustees to invest in more long-term assets such as infrastructure to support the UK recovery.
The UK watchdog told the Financial Timesit will not proceed with a proposed cap on investment in unquoted assets to no more than a fifth of a portfolio.
Several pension commentators had criticised the move as it would restrict schemes’ investment such as infrastructure and private equity, as well as start-up businesses.
David Fairs, executive head of regulatory policy, analysis and advice at TPR, said the watchdog welcomes calls for trustees to consider the full range of investments available to meet the aim of protecting and enhancing savers’ retirement outcomes.
He added: “Trustees of pension schemes have an obligation to invest in the best financial interest of their members. Pension schemes generally have a longer-term investment horizon, which enables them to consider investing in a wider range of assets.”
The regulator proposed the cap in March to target poorly run smaller schemes, some of which had invested up to half of their fund in risky unregulated assets.
However, the reality is that very few pension schemes hold more than 20 per cent in illiquid assets such as infrastructure and private equity.
Fairs said the watchdog looks “forward to working with [the] government and industry to encourage an approach to investment which is in the best interests of savers”.
In an open letter to the industry, published on Thursday, the prime minister and the chancellor of the exchequer argued that it is time to unlock the hundreds and billions of pounds sitting in UK schemes to ignite “an investment Big Bang”.
They pointed out that global investors, including Canadian and Australian pension funds, were benefiting from opportunities of UK long-term investments.
TPR has been approached for comment.
