The UK's Chancellor, Jeremy Hunt, has announced plans for British defined contribution (DC) pension schemes to be required to publicly disclose their level of investment in UK businesses by 2027.

Under the plans, pension schemes will need to disclose how much they invest in the UK compared to businesses overseas, as well as their costs and net investment returns.

In addition to this, underperforming schemes will not be allowed to take on new business from employers, with The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) to have a “full range of intervention powers”.

The government will also require schemes to publicly compare their performance data against their competitors, including at least two schemes managing £10bn or more in assets.

The reforms aim to support the government’s aim of increasing pension investment in UK plc, improving outcomes for members, and driving further consolidation of the pensions market.

While the government said that auto-enrolment had driven a “huge growth” in the amount of investment entering DC schemes, it said that the disclosure requirements were “currently inconsistent” across the market and did not include a requirement for a breakdown of UK investments.

This sometimes made it difficult for policymakers and scheme members in the UK to understand where this money was invested, the Treasury noted.

It argued by ensuring that pension schemes publicly disclose where they invest and the returns they offer, it would enable employers and savers to compare schemes and make more informed decisions.

Furthermore, with the ongoing value for money reforms aiming to improve member outcomes and drive consolidation, the government hopes this will support its ambition of ensuring that pension managers were focused on securing good returns for members.

The plans, which are subject to a consultation by the FCA, also build on the government’s Mansion House reforms, which seek to encourage schemes to invest at least 5 per cent of their assets in unlisted equity.

“We have already started on a path to drive growth, unlock capital for our most promising companies and improve outcomes for savers – and these new rules mean employers and savers can see how their money is invested and how the returns compare to other schemes,” commented Hunt.

“British pension funds appear to contribute less to the UK economy than international counterparts do as they invest less in our domestic businesses. These requirements will help focus minds on how to improve overall returns and outcomes for savers.”

Secretary of State for Work and Pensions, Mel Stride, added: “The incredible success of automatic enrolment has opened up a huge opportunity to grow the economy, boost British businesses and fuel our futures. It has helped us transform the pensions landscape over the last decade.

“And our value for money framework will take this one step further, focusing pension managers on their number one priority – securing the best possible returns for savers – as well as providing a boost to the wider economy.”

Also commenting on the proposed reforms, TPR chief executive, Nausicaa Delfas, said: “Millions of people rely on a pension to support them in later life. That’s why it’s so important that we make sure all pension savers receive value for money.

"With more disclosure helping to spark competition between schemes, and enhanced powers to crack down on poor performers, we can really deliver for savers, now and in the future.”

This story was first published on our sister website, Pensions Age.

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