The Tony Blair Institute in a new report has suggested pooling tens of thousands of public and private sector pension plans in the UK into large ‘GB superfunds’ with assets of up to £500 billion each. The aim is to boost UK business growth by reversing the decline in capital markets. The report argues that overseas pensions invest significantly more in British venture capital and private equity than domestic pensions, which has negatively impacted pensioners and the economy.
The proposal involves expanding the role of the Pension Protection Fund as a fund consolidator and creating regional not-for-profit funds to absorb various pension schemes. Some have criticised the plans for their complexity and impracticality, with simpler solutions suggested.
Pension fund consolidation can be seen in the Australian pension fund industry with Brisbane based Australian Retirement Trust (ART) and Commonwealth Bank recently signing a memorandum of understanding for ART to manage Commonwealth Bank’s corporate pension fund and in the Netherlands Pensioenfonds Metaal en Techniek ( PMT ), PGGM Investments and MN investigating plans for a joint pension management company.
Whilst critics have a valid argument in pointing out that this is no trivial exercise, the significant benefits of greater risk diversification and cost optimisation from economies of scale can have a meaningful impact on generating higher net returns.
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Tony Blair Institute for Global Change
Pensions and Lifetime Savings Association