Prospects of a full national economic recovery post-pandemic could be fuelled by the relaxation of financial regulations on defined contribution (DC) pension schemes. Governor of the Bank of England, Andrew Bailey, recently stated that the relaxation could allow investments in higher, long-term productive investments, such as infrastructure projects, to accelerate the rate of recovery.
Paul Francis, Principal Investment Consultant at Quantum Advisory, believes the move could be the catalyst needed to help boost the economy, but that it should not distract trustees from putting members’ interests first.
Paul said: “Although this notion would only be relevant to the larger pension schemes, allowing DC pension funds to be invested in less liquid investments could offer more long-term growth which is what the economy needs right now and also promote consolidation amongst DC pension fund investors. Currently, legislation means that DC funds are restricted in how much they can utilise illiquid investments. If Andrew Bailey’s suggestions come to fruition, I can see the government not only relaxing rules, but also offering incentives for investors.
“Overall, as long as members’ interests are at the forefront of any investment decisions made under possible new rules, I do think this is a worthwhile idea and could see the pension industry play a real and valuable part in the UK’s post-pandemic recovery.”
13 January 2021