Unlock pension cash or start-ups will continue to flee, says Phoenix chief
Pension cash must be unlocked and allowed to flow into high-growth British firms or more homegrown startups will be driven overseas, the chair of pensions giant Phoenix warned today.
Nicholas Lyons, who is currently on secondment from Phoenix – the UK’s biggest long-term savings firm – as he takes over as Lord Mayor of London, said that UK capital markets had “failed to keep up” with the growth of British firms and the £3tn tied up in pension funds needed to be unlocked.
A charge cap on pension funds has shut off cash from flowing into funds managed by venture capital and private equity firms, which typically charge higher fees. Kwasi Kwarteng last week revealed plans to accelerate reforms to the cap to help money flow into “innovative high growth businesses.
Lyons said today that Phoenix had 13 million policyholders with an average pension pot of £30,000, but current rules meant that money was simply flowing into “corporate bonds and listed equities.”
“Fee caps mean there are constraints on the sort of assets that can be invested in,” he told the Future of Financial Services Regulation conference.
“This is nonsense,” he added.
Tech industry chiefs have been lobbying for a loosening of the cap for years in order to help fill a vast funding gap for growing British firms, estimated to be around £15bn by the Scale Up Institute.
Lyons warned that failure to reform the fees could send more firms towards a deeper investor pool in the US, with a “staggeringly large number of companies” hatched in the UK already having fled due to lack of finance.
Constraints on the types of assets has also hit returns for savers and caused UK funds to lag behind counterparts in Canada and Australia, he added.