The FSB (Federation of Small Businesses) has welcomed the launch of a Government consultation that should see pension schemes encouraged to invest more widely, including investing in start-ups.
 

Greener and more diverse investment

The consultation sets out proposals to encourage defined contribution pension schemes to consider investing more widely, in areas such as start-up companies, housing and green energy.
The proposals include:

• requiring large schemes to report their policy on these types of investment
• requiring smaller schemes to assess, every 3 years, whether they should consolidate into a larger scheme
• changing how schemes calculate charges

Guy Opperman, Minister for Pensions and Financial Inclusion, said that while he understood and supported the principle of pension scheme trustees investing to deliver appropriate returns, that very principle means trustees should be looking at assets that diversify their investments to increase returns.

“These same assets also drive new investment in important sectors of the economy – smaller and medium firms, housing, green energy projects and other infrastructure – which deliver the sustainable employment, communities and environments which all of us wish to enjoy,“ he added.
 

‘Staggering sums’ available for investment

FSB national chairman, Mike Cherry, said it was good to see the Government demanding transparency from big pension schemes around their support for the smaller businesses, which make up 99% of the economy.

“Savers want to know that their money is being used to support the causes they care about – not least their local small businesses,” he said. “They also want good returns, and a fast-growing start-up will provide them more readily than an average-performing blue chip.”

He also saw the benefits for small businesses themselves, which often struggle to obtain enough funding to reach their full potential and could benefit from “more of the staggering sums put away by employees into pension schemes.”

How big are those ‘staggering sums’? According to the Government, assets in occupational DC (defined contribution) schemes have almost tripled to £60 billion since the start of 2011, boosted by the introduction of automatic enrolment into workplace pensions.

However, Mr Cherry remains cautious about how the Government might bring this more diverse investment into being and ensure investment goes where it’s most needed.
“We must avoid a situation where these plans end up benefitting projects and firms that are already comfortable, rather than the high-performing small business owners who are absorbed in making their firms a success,” he warned.
 
You can read the proposals and find out how to have your say here. What do you think about the suggestions? Would you like to see more money awarded to small business investment? Please share your thoughts.