Chancellor Jeremy Hunt has set out a new strategy for pensions designed to unlock funding for high growth firms in the UK.

Under existing Defined Contribution (DC) pension schemes in the UK, companies invest under one per cent in unlisted equity compared with between five and six per cent in Australia.

In his Mansion House speech, the chancellor said that it had created a new ‘Mansion House Compact’ signed by the chief executives of many of the country’s largest DC pension schemes – including Aviva, Scottish Widows, L&G, Aegon, Phoenix, Nest, Smart Pension, M&G, and Mercer – which commits these funds to allocated five per cent of their default funds to unlisted equities by 2030.

These companies represent around two-thirds of the UK’s DC workplace market.

Hunt said that if the rest of the UK's DC market follows suit, this could "unlock up to £50 billion of investment into high growth companies by that time".

In addition, the government has plans to facilitate a programme of DC consolidation to make sure that funds are able to maintain a diverse portfolio of bonds, equity and unlisted assets and deliver the best possible returns for savers.

The chancellor added that pension schemes that don't "achieve the best possible outcome" for members could face being wound up by the Pensions Regulator.

The government has launched the LIFTS competition in a bid to make sure schemes have access to a "wide range of investment vehicles". It plans to consider the bids that have already come in for up to £250 million of government support.

The government is also exploring playing a greater role in establishing investment vehicles, "building on the skills and expertise of the British Business Bank’s commercial arm which has helped to mobilise £15 billion of capital into over 20,000 companies".

"Finally, behind all those plans must sit a financial services sector ready to innovate faster with regulators willing to support them as they do," said the chancellor. "We have one of the most robust regulatory regimes and some of the best regulators in the world."

He continued: "Brexit gives us the autonomy to put their skills to even better use as we seek to become leaders in the industries of the future."

Responding to the chancellor's Mansion House speech, David Postings, chief executive of UK Finance said that the organisation welcomes the plans.

“These reforms will help support economic growth and bolster our capital markets by delivering more investment and making it easier for companies to grow and list here in the UK," added Postings. "Our approach to regulation and innovation is also key and we look forward to supporting Joe Garner’s review on the future of payments, which builds on our already world-leading payments systems.

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