The government wants to unlock £75 billion ($95.4 billion) in alternative investments through a package of changes for defined benefit and defined contribution plans.
As part of the government's push to promote growth of the U.K. economy, the Department for Work and Pensions is seeking input on how defined benefit funds could increase investments in alternative asset classes, while ensuring benefits are secure and the stability of the gilt market is maintained.
Abdallah Nauphal, CEO of Insight Investment, said in an emailed comment: "We believe that creating a more conducive environment for DB pension schemes, by reforming the legislative and regulatory framework to keep these assets working, is the best way to protect both the U.K. economy and member benefits."
"DB pension fund surpluses have the potential to unlock over £300 billion to invest in the U.K. economy which would reinvigorate U.K. capital markets. This is a once-in-a-generation opportunity which would ensure that pension scheme surpluses fulfill their potential," he added.
Nine U.K. defined contribution plans agreed with the government to channel 5% of their default funds into private U.K. companies by 2030.
Lee Hollingworth, head of U.K. retirement at Franklin Templeton, added in a separate emailed comment that investing in alternative assets such as private equity will allow DC plans to access a wider variety of companies, especially as the number of listed companies is declining.
Mr. Hollingworth also welcomed that the government is consulting on whether local government pension scheme funds should increase private equity allocations to 10%.
Also Tuesday, the government published further details on rules for the operation of DB superfunds, aimed at DB plan sponsoring employers and trustees for which buyout is not an option. A permanent regulation for superfunds is expected "as soon as parliamentary time allows," it said.
Nicholas Clapp, business development director at the £10.3 billion multiemployer DB and DC plan TPT Retirement Solutions, Leeds, England, welcomed plans to formalize the superfund rules.
"For the pension industry to evolve, the new regime must find a way to expedite overcoming the regulatory hurdles that prevent schemes at both an organizational and transaction level from joining a superfund. If this is done successfully, there will be a clear increase in the number of schemes that can successfully journey into a superfund."
The government also wants to assess the "culture of investment decisions" and improve its own understanding of retirement trustees' fiduciary duty across DB and DC plans — a move that the Pensions and Lifetime Savings Association welcomed.
Further, the government proposed the introduction of a consolidator model for very small DC plans, which would automatically consolidate any dormant pot of £1,000 or under.
Responding to the proposal, Phil Brown, director of policy at £21 billion People's Partnership, provider of The People's Pension, Crawley, England, said in an emailed comment: "This proposal, if implemented effectively, and provided it comes with the correct product parameters and regulatory framework, will go a long way to help solving a problem which will only get worse if it's not properly tackled," he added.