CNN. The UK economy badly needs a boost — and the government hopes the nation’s vast pension savings might deliver one. UK finance minister Jeremy Hunt announced Monday that nine of Britain’s biggest pension providers had agreed to increase their investments in high-growth UK companies, a move that he said could unleash up to £50 billion ($64.5 billion) of funding if other pension funds followed suit.
As part of the compact, firms including Aviva (AIVAF), Legal & General (LGGNY) and Mercer have committed to allocate at least 5% of assets in their default funds to unlisted companies by 2030. All UK workplace pension plans offer default funds, which savers who don’t choose their own investment strategy are automatically enrolled into.
“British pensioners should benefit from British business success,” Hunt said ahead of his annual Mansion House Speech about the state of the UK economy, delivered in front of hundreds of top executives in London.
“Unlocking investment” could increase the typical retirement income by over £1,000 a year ($1,300) and direct more funds toward “our most promising companies, driving growth in the UK,” he added. Measures to tap pension fund cash come at a crucial time for an economy suffering from stubbornly high inflation, depressed investment and feeble growth. The government is also under pressure to deliver post-Brexit benefits for London, the center of Britain’s hugely important financial services sector.