As he confronts ‘restrictive’ pension requirements, Rishi Sunak discusses the adjustments.
Traditionally, pension funds have not been as invested in venture capital and the start-up ecosystem as they have been in other nations.
Harry Stebbings of the 20VC Podcast spoke with Chancellor of the Exchequer Rishi Sunak about how the government might enhance investment in the sector beyond the Future Fund. “The Future Fund can’t be relied on, and it’s not the government’s role to do that long-term,” stated the Chancellor.
“Stepping in during a crisis to ensure we don’t lose a vital element of our inventive eco system is one thing, but it’s not a long-term solution.”
The pension fund industry in the United Kingdom may be the world’s second or third largest. However, when compared to countries such as the United States or Canada, it has historically underinvested in liquid assets such as venture capital.
“We’re trying a couple of things to change it,” Mr Sunak stated.
“One of them is known as a long-term asset fund.
“We’re developing a new model with the Bank of England, the Financial Conduct Authority, and industry to build a vehicle that will hopefully address the liquidity difficulties that pension funds face when investing in liquid assets.
“We announced it in November of last year, and we’re still working on it.
“Hopefully by the end of the year, it will be established, and everyone is looking forward to trying to unlock some capital.”
Mr. Sunak then moved on to discuss the Charge Cap.
The Charge Cap establishes guidelines for the fees that pension plans are permitted to charge.
As a result, it decides what they can invest in.
“I think what we’ve heard is that such criteria are perhaps too rigid and inflexible to deal with the lumpiness and nature of VC returns,” Rishi added.
“What we’re doing is speaking with you to see if you can smooth some of this out.
“The fees are subject to an annual cap under this charge cap. Because VC returns can be highly lumpy, you get a lot of big years.
“We’re thinking about giving it a little more freedom.
“It’s been a long time coming from the industry, and hopefully we can get on with fixing it and that will help.”
Mr Stebbings questioned the Chancellor about the things that the public thinks the government should do but can’t.
“I believe,” Rishi remarked. “Brinkwire Summary News.”