U.K. defined contribution funds should invest in private assets and support the nation's tech sector through a new growth fund, London's lord mayor said Monday at a tech industry dinner in London.
Lord Mayor Nicholas Lyons raised those ideas in a new report, Powerful Pensions, that was jointly developed by the City of London Corp., Ernst & Young and Innovate Finance, an industry group for U.K. financial technology.
The proposed Future Growth Fund of up to £50 billion ($60.2 billion) led by the private sector could provide critical funding for the U.K. tech sector, if regulatory barriers for defined contribution plans are reformed, said Mr. Lyons, who also called for more education and engagement with pension fund investors about unlisted asset classes like private equity and infrastructure.
"The U.K. has the second largest pension fund pot in the world, but U.K. pension funds invest less in private equity and infrastructure than our competitors. We're missing a trick here – which is leading to the majority of U.K. pension funds and their scheme members not benefiting from these high growth investment opportunities," Mr. Lyons said in remarks prepared for the dinner.
Mr. Lyons is on sabbatical as chairman of Phoenix Group, a retirement savings business, until his term in the largely ceremonial role of lord mayor ends in November.
The new report offers several recommendations for making it easier for defined contribution retirement funds to invest significantly in private equity as an asset class. They include consolidating smaller defined contribution funds and creating economies of scale that would allow for more risk diversification.
Mr. Lyons has helped facilitate discussions with pension fund executives and fintech industry representatives to advance the Future Growth Fund concept, and U.K. regulators have been working on regulatory changes to allow more defined contribution plan investments in illiquid assets.