Pension providers Aegon UK and Natwest Cushon are backing the government’s British Growth Partnership (BGP) to give workplace savers access to innovative investment opportunities that could boost pension pots.
Previously, this type of investment was not available to defined contribution schemes, so the move represents a major shift for providers and savers.
Chancellor Rachel Reeves announced that the two pension firms would provide cornerstone funding for the BGP in her Mansion House speech last night. This funding will be subject to regulatory approval, investment due diligence and commercial discussions with trustees.
Once approval is confirmed, the British Business Bank plans to launch the BGP in 2025. It will invest in high quality, UK growth companies looking for investment to scale their operations.
In her speech, Reeves also said that, alongside Phoenix Group, the British Business Bank has completed its ‘long term Investment for technology and science’ (LIFTS) in Schroders Capital, to create a new £500 million investment vehicle to invest in UK science and technology. The government expects 20 percent of the LIFTS capital to be invested into life sciences, which will support growth.
Workplace default pots
Aegon UK said the BGP investment will form part of its largest workplace default fund, the £12 billion Universal Balanced Collection (UBC) fund. Earlier this year, the provider revealed plans to “significantly evolve and incorporate private market investments” into the UBC’s investment portfolio to increase saver returns.
NatWest Cushon said its intention to fund BGP is part of a wider strategy to grow its investment in the UK private market. It said unlisted UK assets can generate investment returns for members and they can improve member engagement.
“It’s easier to create emotional connections between members and UK success stories,” it said.
UBC fund transformation
The transformation of Aegon UK’s UBC fund, which began in September, aims to improve outcomes for over 700,000 members and provide better risk-adjusted returns and value for money by offering access to a broader range of investment opportunities.
Mike Holliday-Williams, CEO at Aegon UK, said: “In June we announced plans to revolutionise our largest workplace default to include private market investments. This partnership with the British Business Bank further demonstrates our cutting-edge capabilities, with the aim of providing workplace savers with access to innovative investment opportunities that have previously been out of reach to DC pensions.”
Bigger pension pots
Lorna Blyth, MD of Investment Solutions, Aegon UK, said: “We are on the path to evolve the UBC fund and turn it into a default fund fit for the future. These changes build on our recent investment into our first bespoke Long Term Asset Fund and focus on robust risk management and diversification. We believe these changes will offer our members improved outcomes and value for money.
“By partnering with the British Business Bank, we can unlock investment into businesses with high growth potential through the BGP, and capture the full commercial potential of world-class breakthrough technology companies.”
Ben Pollard, CEO at NatWest Cushon, said: “As a signatory to the Mansion House Compact, we see the UK growth agenda as a win-win. By investing in impact focused sectors and UK high growth companies, we’re helping secure better outcomes for pension savers and a better future for them and broader society. Initiatives like the BGP are critical to giving pension schemes access to these investment opportunities.”
