Budget calls for more transparency on pension funds

The government has used the Budget to announce that it will bring forward requirements for Defined Contribution (DC) pension funds to publicly disclose the breakdown of their asset allocations, including UK equities.

Chancellor Jeremy Hunt said that pension funds will be working closely with the Financial Conduct Authority (FCA) who share responsibility for setting requirements for the market. The FCA will consult in the spring. The government will introduce equivalent requirements for Local Government Pension Scheme funds in England & Wales as early as April 2024. It will review what further action should be taken if this data “does not demonstrate that UK equity allocations are increasing”.

The government also said it is working with the FCA and The Pensions Regulator (TPR) on the upcoming Value for Money (VFM) pensions framework.

The framework will highlight where schemes are focusing on short-term cost savings at the expense of long-term investment outcomes, and where schemes’ current scale may be preventing them from offering value to savers.

The Treasury said that where schemes are persistently offering poor outcomes for savers, the FCA and TPR will have the full range of regulatory powers available, adding that the government expects them to use the powers; these include closing a scheme to new employer entrants and, where necessary, winding up a scheme.

BVCA chief executive, Michael Moore, said: “We welcome measures that would increase transparency around where, and how effectively, UK DC pensions capital is invested which should encourage diversification across a broader range of assets.

“We look forward to working with the Government and regulators to ensure the detail helps DC schemes identify the substantial investment in UK businesses they can make through UK private capital funds. As the Chancellor said, savers in countries like Australia are benefitting from returns that UK savers should be getting too.”