A debate about how to harness UK pension assets to drive growth in the British economy has heated up in recent weeks with the Chancellor of the Exchequer to the Lord Mayor of London lamenting a perceived lack of investment by the £2.5trn UK pension sector in high growth, but high risk, venture capital assets.
We should not lose sight of the fact that our pension schemes already invest more than £1trn in UK-domiciled shares and bonds and have a higher domestic equity exposure than some of their giant overseas pension counterparts including Canada, Japan and the Netherlands.
Nevertheless, pension funds are open to initiatives that would result in greater investment of pension assets into UK growth, provided the needs of savers, pension funds and the government can be aligned.
At this year’s conference, economic secretary to the treasury and City minister Andrew Griffith MP will discuss the government’s ambitions to unlock pension scheme investment in UK growth assets, while a further keynote will see a panel of leading chief investment officers discuss the challenges and opportunities from doing so.
Path to net zero
UK pension schemes are increasingly making progress towards net-zero alignment, with six in 10 UK schemes already have a net-zero alignment in place.
Of those that don’t, this is largely to do with the difficulties of comparing like-for-like data received from investee companies and wanting to ensure their commitment is robust.
Pension schemes have called on the government to progress its green finance strategy, finalise the UK green taxonomy, ensure climate reporting is embedded across the investment chain and accelerate efforts to make the City of London the world’s first net-zero financial centre.
At Investment Conference 2023, former shadow chancellor Ed Balls will discuss how a future Labour government would harness the power of pension investment to support the transition to net zero. Delegates will also hear from experts about how to integrate climate risk, transition risk and scientific research into asset class return projections, as well as practical advice about completing TCFD reports.
A panel of senior pension fund investment managers will also explore how pensions can support the decarbonisation agenda while avoiding unintended consequences.
A new environment for DB funds
At this year’s conference there will also be significant focus on the changing landscape for defined benefit (DB) pension funds.
Higher interest rates have improved funding positions and opened the door to buyout for many schemes. The conference will explore the key issues schemes need to assess in their end-game thinking. From the pros and cons of moving to buyout, to the need for residual risk cover, and how to avoid traps during the transition to endgame.
We will also be taking stock of liability-driven investment in the wake of the “mini” Budget and gilt market turmoil last year. Schemes of all sizes are re-thinking scheme governance, asset allocation and portfolio reconstruction.
Sessions will look at what lessons have been learned, how schemes should manage risk and what governance structures they should have in place for the future.
Also, high up on defined benefit funds’ priorities is the DB Funding Code. A panel of experts, including The Pensions Regulator, will discuss what the final code might look like and how it will be applied once it becomes operational later in the year.
Investing in a challenging economy
Fresh stagflation and recession fears mean the challenging investment conditions of the last decade are not going away any time soon.
In what is frequently one of the most popular sessions at the investment conference, senior representatives from asset managers will provide an outlook on investments and opportunities for pension funds. They will explore the opportunities and risks across different asset classes as well as inflation protection measures.
They will attempt to answer where the typical DB and defined contribution scheme should invest globally.
To be part of the UK’s largest event focused on pension fund investment, visit the PLSA.