The government is creating “new investment vehicles tailored to the needs of pension schemes” with the aim of supporting investment in “high-growth” UK companies, including a new growth fund run by the British Business Bank. 

The Treasury and chancellor Jeremy Hunt have announced a £320m plan “to drive innovation and unlock the first tranche of investment from his Mansion House Reforms”, repeating the claim that they expect a £75bn collective investment to lead to a £1,000 a year increase in pensions for the average saver. 

Hunt said: “Innovation is the key to our future success as a nation and it’s vital that we do all we can to help companies start, scale and grow in the UK. Tomorrow’s Autumn Statement will be a huge step towards delivering our Mansion House Reforms and unleashing the full potential of our pensions industry.” 

The government plans to set up a new investment vehicle run by the British Business Bank, to encourage additional institutional investment into UK venture and growth assets. Insurers Aviva, Legal & General, Aegon, Phoenix and M&G, alongside pension funds Smart Pension and the Universities Superannuation Scheme and consulting firm Aon, said they would engage with the BBB to help design the vehicle so it meets pension schemes’ needs. 

According to the Treasury, £250m will be committed to two successful bidders under the Long-term Investment for Technology and Science initiative, subject to contract, to channel more than £1bn of investment from pension funds and other sources into UK science and technology companies. 

In addition, a 'Growth Fund’ will be established within the British Business Bank, “to give pension schemes access to opportunities in the UK’s most promising businesses". 

The Treasury has also said it will provide £20m to encourage more university spin-outs, and at least £50m in additional funding for the British Business Bank’s ‘Future Fund: Breakthrough’ programme, which supports these companies to scale up. 

 

It has also accepted all 11 recommendations by a review of university spin-outs published on Tuesday, including a recommendation to accelerate changes to pensions regulation to make capital available to spin-outs. 

 
Michael Moore, chief executive of the British Private Equity and Venture Capital Association, said: “The independent university spin-out review is a hugely welcome statement of intent. Private capital has as important role to play by bringing both investment and expertise to transform the world class research in UK universities into world class businesses. The recommendations in this review can help to generate ways to get more capital working together with the best ideas to achieve that.” 

 

Tim Bradshaw, CEO of the Russell Group, said the review highlights the value spin-outs have added to the UK economy. 

 

“We look forward to working closely with the government and investors to build on the momentum from this review to ensure we can not only sustain but hopefully grow the already thriving UK spin-out eco-system,” said Bradshaw. 

 

Vivienne Stern, CEO of Universities UK, said: “We support the ambitions of the review for universities, investors and government to come together and work collaboratively to maximise opportunities for university spin-out activity. University spin-outs create thousands of jobs across the UK and will play an important role in driving the economic growth and local regeneration that the country needs.” 

 

Commenting on the Treasury’s announcement, Tim Orton, chief investment officer at Aegon, one of the companies in support of the programme, said investing in private assets will be a completely new venture for many pension schemes.  

“Alongside Long Term Asset Funds, we welcome the development of the British Business Bank’s offering as it’s important to offer a range of routes into such investments,” he said.  

 

“But crucially, making changes to workplace pension investments is something which shouldn’t be rushed, which is why the Compact commitment to invest 5% of default funds in private assets is looking ahead to 2030. Pension schemes must be given time to plan a considered and effective move into private assets, with improving member outcomes front and centre.” 

 

Earlier this week, the Pensions and Lifetime Savings Association said it wants to see an expanded role for the British Business Bank to improve the supply of investible UK growth assets at reasonable cost.