With over £2.5 trillion, the UK has the largest pension market in Europe.
UK institutional investors (i.e. Aviva, Scottish Widows, Aegon to name a few) are not investing as much in UK high growth companies as other countries do.
The flagship element of Jeremy Hunt’s initiative is a “compact”, signed by nine of the UK’s largest pension providers, to commit 5 per cent of their so-called default funds, which most of your pension savings are invested, to unlisted equities by 2030.
Pension savings will now be used to boost investment in our economy and could provide the potential for greater long- term growth in pension fund values.
- What is a default fund?
Your employer’s default pension fund is chosen to fit the average staff member.
It’s the equivalent of everyone being given a medium-sized t-shirt but of course, one size won’t fit all.
- What is a private company?
They’re not listed on a marketplace (stock market) where the company’s shares can be traded. Unlike a listed company, an unlisted/private equity firm is an illiquid and higher risk investment.
Due to the nature of these companies which tend to be younger and smaller the risk of failure is higher, especially with the cost of borrowing at record highs.
Our Chancellor boasts that ‘For an average earner who starts saving at 18, these measures could increase the size of their pension pot by 12% over their career – that’s worth over £1,000 more a year in retirement.’
Whilst in theory this is a great plan, a huge boost to high growth UK businesses and potentially a positive retirement outlook for savers, when IFAs provide projections like this, we must adhere to the FCA Handbook and provide a large risk warning that this is a projection which is not guaranteed and explain your money is at risk.
Are you comfortable with how your default pension fund is invested, does the T-shirt fit you?
If you would like advice on your Pension or other Investments, just call for independent financial advice, the first hour is free!
Pippa Vaughan-Avery is a Financial Adviser at Abacus Assurance Financial Services Ltd Porthcawl
Telephone 01656 772222
Email info@abacusassurance.com Web www.abacusassurance.co.uk