Contribution
He may not have been paid at all. His focus at the beginning of his remarks on growth and one of its key enablers, investment, was right. If we stepped back and forced ourselves to ask, “What is the one thing the British economy needs more of?”, it would be public and private investment. As several hon. Members have said, the UK has the second largest pension scheme in the world, worth £2 trillion. It is our largest source of domestic capital, underpinning not just the retirement we all—or at least most of us—look forward to, but the investment on which our future prosperity depends.
That is why this Government launched and concluded a review of pensions investment within a year of taking office. Those reforms are now being taken forward through the Pension Schemes Bill, as the hon. Member for South West Devon (Rebecca Smith) pointed out. First and foremost, the Bill includes measures to deliver bigger and better pension schemes in the DC market. It requires multi-employer defined contribution pension providers to hold at least £25 billion in assets by 2030 or to be on track to do so by 2035.
That requirement will drive scale and sophistication in workplace DC schemes so that they are better positioned to invest in a fuller range of asset classes, including specialist private markets such as venture capital, which we have not heard much about today but which are key. The biggest gap in UK capital markets is growth finance: the gap that holds back our science and tech start-ups, scale ups and pre-initial public offering companies. That does not take away from the challenges we are raising about public markets, but if we look at our capital markets as a whole, that is our biggest gap.
Pensions can be a key source of funding for those economically critical investments and sectors, which my hon. Friend the Member for Buckingham and Bletchley (Callum Anderson) set out, as he has done many times in the discussions on the Pension Schemes Bill. This is not just theoretical; it is actually starting to happen. Legal & General is investing in post-quantum cryptography and Nest is investing in energy generation. Last week, the Chancellor and I met with Aegon UK, NatWest Cushion and M&G, which have all confirmed that they will invest £200 million in the British Growth Partnership, a fund managed by the British Business Bank investing in cutting edge British businesses and building on British strengths in areas such as clean energy, advanced manufacturing and the medical technology that other Members have talked about in the past.
As we have heard, Members are well aware of the Mansion House accord, a voluntary commitment by 17 major DC funds to invest 10% of their main default funds in private assets by 2030, including 5% in UK private assets. That will boost investment across a range of asset classes, including growth market equities, which we have not touched on much today. That is welcome news driven by a focus on giving savers better returns and showing how pension funds can contribute directly to making Britain the best place to start up, scale up and ultimately list companies. I should emphasise that we should think about our capital markets as a ladder up which firms can climb. Our job is to make that climb easier, not just to focus on the ultimate destination.
Several Members raised the question of transparency. The Pension Schemes Bill includes a new framework under which DC funds will need to disclose their investments in more granular detail, including UK-overseas and asset class split. We will be able to see in more detail what individual schemes are doing. We are doing that so that we can measure their value for money. For the first time, we will be able to see where those funds are invested.
Finally, as Members know, the Bill includes a reserve power, which has been discussed today, to ensure that the change that the pension schemes themselves say is needed in the interest of members happens. I will repeat what I said on the “Making Money” podcast—it is very exciting that the hon. Member for South West Devon had time to tune in. I am confident that this power will not need to be used, given the progress the industry is already making. It is designed as a proportionate backstop to the commitments that the industry has already made, with strong safeguards to protect the interests of pension savers.
On mandation, I note—as gently as possible, given the excellent tone of this discussion—that I have spent much of the last six months hearing strong opposition to any mandation backstop while hearing, often from the very same people, language that does not directly contradict that, but gets close to calling for mandation, whether it is social housing, public equities or anything else. I just gently note that tension before as gently moving on to set out some of the wider steps that the Government are taking to support our capital markets, because they go far beyond pensions. It is important to note that although UK equity markets have faced some challenges in recent years, London’s markets remain some of the deepest and most liquid in the world. We want to build on those strong foundations and make the UK as attractive a destination as possible for companies to start, scale and stay. There is a danger here: we need to make sure we are having this discussion about the change we need to see, while also celebrating many of the real strengths that exist in London’s capital markets.