Autumn updates to the Government’s Mansion House Reforms

Ahead of the recent Autumn statement, the government issued an update regarding the Mansion House Reforms. This included specific actions that were previously stated as ambitions or areas that will be explored. Most notably, the government will initiate the creation of new investment vehicles designed to make it more practical for pension funds to invest in unlisted equities.

Goals for the Mansion house Reforms

In July the Chancelor made a speech setting out reforms aimed at pensions and wider financial services which have thus been called the “Mansion House Reforms.” The aim stated for these reforms is to enable the UK’s financial services sector to unlock capital for use in growth industries to support increased returns for savers and promoting wider economic growth. The key element from this statement of reforms is a goal for providers of defined contribution pensions to invest 5% of their default fund (funds which are used by default from workers paying into DC pensions funded) assets into unlisted equities by 2030. This goal is supported by 9 large pension providers who are agreeing to this shared ambition. Local government pension schemes were targeted to raise their holdings in private equities to over 10%; however, at the initial stage, no details were provided that would make this easier to achieve for providers.

Investment vehicles

The latest press release, 4 months after the mansion house speech, gives details on the creation of new investment vehicles to promote these aims. A “Growth fund” will be established within the British business bank (BBB), providing a convenient vehicle for investment in potentially small and unlisted growth companies. Through the BBB £250 million will be used to seed two investment vehicles as part of the “Long-term Investment for technology and science” initiative. These new instruments aim to make investment in small and unlisted equities more accessible to pension schemes, supporting providers in meeting their voluntary commitments under the original Mansion House Reform.

8 large providers have confirmed that they both support the governments ambitions for institutional investment in growth assets and that the vehicles provided could prove useful. These providers will also engage with the BBB on the specific design of this vehicle along with the implementation of the Mansion House Reform plans. Companies engaging at this stage are Aviva L&G, M&G, Smart Pensions, Aegon, Phoenix, AON, USS (note that this is a slightly different list of providers to the 9 that signed up to the original voluntary commitment.)

Spin-out companies and a venture capital fellowship scheme

The update also focused on companies created using research performed in universities, known as “spin-out companies”. A £20 million injection is planned to foster more spin-out companies while £50 million will also be provided to the existing ‘Future fund: Breakthrough’ programme through the BBB. This is announced after an independent review of spin-outs has provided a set of ‘best-practice policies’ which has been endorsed by investors and university representatives.

Additionally, the update announced a new venture capital fellowship scheme, similar to the Kauffman Fellowship in the US, which will aim to develop “world-leading investors” for VC funds.

The Autumn statement also detailed plans to promote the consolidation of DC pensions. The Autumn statement is discussed more widely in our recent summary.

References: GOV.UK: £320 million plan to usher innovation and deliver Mansion House Reforms