The U.K. government should introduce further measures to help consolidate retirement funds to boost their investments in U.K. companies.
The call was made by the Resolution Foundation, a think tank focused on improving the living standards of low- and middle-class income earners.
Among the recommendations was for the U.K. government to expand the London-based £39 billion ($49.1 billion) Pension Protection Fund — the lifeboat fund for the defined benefit funds of U.K. insolvent companies — to cover solvent plans as well.
In a report it also said the government should complete legislation to create defined benefit superfunds and cut the number of defined contribution plans by 90% through stringent value for money tests that would force DC plan sponsors to outsource to multiemployer DC plans.
Among other recommendations, the Resolution Foundation also said local authority pensoin funds, which together represent £300 billion in assets, should further consolidate to become one investor. The 89 England and Wales local authority funds have already come together to invest through eight asset pools.
The think tank said that along with further consolidation, the government could make further changes to help retirement funds gain a bigger share of the U.K. market. DC and DB plans in aggregate allocate only 2% of their assets to U.K. equities, resulting in U.K. firms having the lowest share of large local shareholders that can influence them among Organization for Economic Co-operation and Development countries, the report said.
The think tank said the British Business Bank should be allowed to borrow with a government-backed guarantee, and offer a co-investment fund which would allow pension funds to invest as a limited partner alongside it.
To further help finance U.K. investment, the Resolution Foundation also recommended an increase in minimum automatic enrollment contribution rates by both employee and employer to a combined 12% from a current minimum rate of 8%.
It is the latest call for further consolidation of retirement plans in the U.K. The U.K. government said in March that local authority pension funds should "move further and faster on consolidating assets" into one of the existing investment pools to boost U.K. investments.
