Britain proposes easing rules on pension funds investing in less liquid assets

A cap on how much pension funds can invest in less liquid assets should be scrapped to encourage more investments in longer-term assets to help the British economy recover from COVID-19, a UK-government backed report said on Monday.

Direct contribution (DC) pension schemes face a cap of 35% for investing funds into less liquid assets, one of the most significant barriers to schemes that may want to increase such investments, the report from a working group chaired by the Bank of England, the Financial Conduct Authority and Britain’s finance ministry said.

The Productive Finance Working Group set out recommendations to encourage DC pension schemes to generate better returns for investors.

These types of schemes, the value of which depends on returns from investments, have grown from 200 billion pounds in 2012 to over 500 billion pounds, and are expected to double to a trillion pounds by 2030.

“DC schemes trustees, trade bodies and consultants should consider how increasing investment in less liquid assets could generate greater long-term value for their members,” the report said.

“Greater investment in longer-term productive UK assets, such as research and development, technology, and infrastructure can provide a boost to long-term growth and support an innovative, greener future for the UK.”