Jeremy Hunt defends pensions tax break
Jeremy Hunt said Britain’s pension system needs “big reform” to ensure people receive higher returns. The Chancellor suggested the UK could follow other countries such as Australia and Canada which allow pension funds to invest in lucrative but potentially riskier assets such as infrastructure.
Sir Jonathan Symonds, chairman of pharmaceutical company GlaxoSmithKline, is providing informal advice on how to get higher returns on money invested in defined contribution pension schemes.
Mr Hunt said the schemes, which are most common in the private sector, will provide the “biggest opportunities to unlock investment in to high-growth British industries”, according to the Telegraph.
The Chancellor was speaking in Washington on Thursday as he attended the spring meeting of the International Monetary Fund with other finance ministers.
Asked if pension schemes should be forced to invest in the stock market as opposed to lower risk bonds, Mr Hunt said: “It’s not something I would instinctively be comfortable with, because I think one of the strengths of the City is that we give financial institutions complete freedom to invest where they think they will get the best returns for the people whose money they’re looking after.
“But we’re looking at all these issues. My concern is that pensioners and future pensioners are not getting the returns that they could expect.”
The Chancellor cited Australia and Canada as having pension regimes that deliver higher returns.
He said: “Countries like Australia and Canada have found a way of making sure that they get better returns by consolidating their pension fund industry in a way that makes it easier for them to invest in unlisted and potentially higher growth vehicles and that’s the thing I think needs to be worked on.”
Mr Hunt’s comments were welcomed by former pensions minister Baroness Altmann who said the move would boost Britain’s economy as well as personal pension pots.
She told the Express: “I agree that pension funds have been too heavily invested in low return assets, rather than investing in higher growth companies or infrastructure and social housing which can deliver better long term returns.
“UK pension funds have cut their exposure to shares, in favour of much lower yielding bonds and these supposedly low risk assets left them with huge losses as they turned out to be far more risky than expected.
“It’s time to get Britain’s pension funds investing in British growth. That will improve people’s pensions as well as the economy.”
Ex-pensions minister Sir Steve Webb, partner at pension consultants LCP, added: “There is no doubt that pension funds in countries such as Australia and Canada are much bigger than those in the UK.
“This helps them to invest globally and to build up specialist expertise in investing in areas beyond traditional areas such as shares and bonds.
“Although UK schemes are getting larger, there is a case for rationalising the system so that we have far fewer very small schemes.
“This should help pension savers get better value for money and provide more funds to invest in the growth of the UK economy.”
Mr Hunt used his spring Budget to abolish the tax-free lifetime allowance limit, which had stood at £1.07million.
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