Pension Schemes Bill: government on verge of scoring “own goal” by excluding investment companies
Baroness Altmann criticises “irrational” decision.
As the Pension Schemes Bill continues its passage through Parliament, the Association of Investment Companies (AIC) is urging the government to amend the Bill to include investment companies. The AIC’s call is supported by former pensions minister Baroness Ros Altmann, Baroness Sharon Bowles, Jonathan Lipkin from the Investment Association and other key industry figures quoted below.
Investment companies manage more than £100 billion in assets such as infrastructure, property, renewable energy generation, private companies and startup businesses. As the legislation is currently drafted, pension schemes would not be able to meet any future requirement to invest in private assets by using investment companies.
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “Excluding investment companies from the Pension Schemes Bill simply does not make sense. The Bill gives the government powers to mandate pension schemes to invest in certain types of assets. Let’s say these powers were used in future: pension schemes would be barred from using a fund structure which has been thoroughly road-tested as a way of accessing these assets. Leaving investment companies out of the Bill doesn’t just undermine the UK’s world-leading investment company industry: it also risks restricting choice for pension schemes and harming pension savers. Sticking with this policy is a clear and avoidable own goal.”
Leaving investment companies out of the Bill doesn’t just undermine the UK’s world-leading investment company industry: it also risks restricting choice for pension schemes and harming pension savers.
Richard Stone, Chief Executive of the Association of Investment Companies (AIC)
Baroness Altmann, a former pensions minister, said: “Listed investment companies are an ideal way for pension funds to invest in illiquid long-term assets, such as infrastructure, property, alternative energy and small growing businesses. They have proven expertise in putting together diversified portfolios of expertly managed assets, which investors can buy to gain exposure to the exact assets which government wants pension funds to support. Therefore, it seems irrational for the government to deny pension funds the choice of using closed-ended investment trusts or REITs, if they want to meet their Mansion House Accord targets.
“Excluding trustees from these investment companies would close off an investment option that could ensure more pension money flows into new productive investment opportunities, boosting their long-term returns and the economy. Permitting this choice does not force any pension fund to buy investment companies, it simply widens their opportunity set.”
Baroness Bowles, a member of the House of Lords Financial Services Regulation Committee, said: “The government has adopted a policy that discriminates against investment companies in favour of other vehicles. This is unacceptable. If the justification is that investment companies simply reallocate capital from one investor to another, then exactly the same is true when inflows are netted off against outflows in an LTAF. Listed investment companies have raised billions to invest in productive assets. To exclude them from the Pension Schemes Bill is a glaring mistake which is surely not a good advertisement for London capital markets.”
Jonathan Lipkin, Director of Policy, Strategy & Innovation at the Investment Association, said: “Private markets are playing an increasingly important role in the capital market ecosystem and supporting both UK economic growth and infrastructure funding. It is encouraging to see progress enabled through the Mansion House Accord and Compact. As the government considers its reserve powers, it is important that the Pension Schemes Bill does not exclude investment companies. The focus must be on the assets where capital is allocated, not the choice of investment structure used to access them.”
Mike Gerrard, Chair of International Public Partnerships (INPP), said: “For nearly two decades, INPP has partnered with UK governments to deliver the essential infrastructure that underpins daily life, including key projects like the Thames Tideway Tunnel or more recently the Sizewell C nuclear plant.
“As a listed, closed-ended fund, INPP is built for stable long-term capital, aligning naturally with the needs of state and workplace pension schemes, offering liquid and transparent access to otherwise hard-to-reach infrastructure assets.
“The Pension Schemes Bill presents a historic opportunity to channel more pension capital into national infrastructure and unlock private investment for growth. But as currently drafted, it excludes investment companies – the very vehicles that have already committed billions to UK infrastructure. That would be a missed opportunity at the precise moment the government is seeking to mobilise domestic capital. Including investment companies within the Bill would broaden choice, reduce risk, and help deliver the government’s objective of channelling long-term pension capital into vital national infrastructure.”
Richard Laing, Chair of 3i Infrastructure, said: “Investment companies are an extremely effective route to investing in private infrastructure businesses and assets. Including investment companies in the Pension Schemes Bill will enable the government to achieve its aim of encouraging pension schemes to invest more in private assets.”
Richard Morse, Chair of The Renewables Infrastructure Group, said: “By offering, long-term, diversified and inflation-correlated returns underpinned by real assets, British infrastructure investment companies are a natural fit for British pension schemes. Including investment companies within the Pensions Bill would give schemes access to stable, productive investments that support the UK economy. Excluding them would introduce an unnecessary bias and limit schemes’ choices.
“The UK has a great track record of investment companies. Companies such as The Renewables Infrastructure Group (TRIG) are longstanding investors in infrastructure helping to secure the energy transition. Alongside investments in power generation, we are preparing to deploy £200+ million into new UK battery projects – a critical asset class to keep the power grid stable and the transition affordable.
“The amendments put forward by Baronesses Bowles and Altmann are pragmatic, pro‑investment changes that support good governance and will help pension savers access a wider investment set. We strongly support them.”
Richard Shepherd-Cross, Investment Manager of Custodian Property Income REIT, said: “Excluding real estate investment companies from the definition of ‘private assets’ in the proposed Pension Schemes Bill would be counterintuitive. As investment manager to Custodian Property Income REIT, I can attest to the benefits of a closed-ended, investment trust in providing liquid, affordable access for pension schemes to invest in private real estate assets in a diversified, managed way. Most pension investors would feel excluded from investing in commercial real estate without investment trusts, lacking the knowledge, capability and property market exposure to invest directly.
“Real estate investment trusts overcome one of the biggest barriers to pension scheme investment, which is liquidity, through trading on a recognised exchange. Real estate also provides strong income returns which are aligned to a typical pension scheme returns profile. The structures provide a permanent source of capital to improve the built environment of the UK, investing in towns and cities and upgrading the environmental credentials of properties to meet net zero commitments.
“Legislation should not focus on excluding investment trusts but instead ease restrictions on capital raising to support earnings and economic growth. The infrastructure of real estate investment companies already exists. The management teams are highly skilled and ready to deliver. Increased pension scheme investment will revitalise the sector and will unlock growth for the whole economy.”
Ian Brown, Head of Corporate Strategy & Investor Relations for Tritax Big Box REIT, said: “Investment companies like Tritax Big Box provide pension schemes with direct access to high-quality, long-term real assets that underpin UK economic growth – from nationally significant infrastructure to strategically located distribution facilities supporting domestic supply chains.
“Our closed-ended structure offers permanent capital, which is particularly well suited to long-duration, illiquid assets such as real estate and infrastructure. It allows managers to invest for the long term, aligning with the liabilities of pension schemes. Moreover, the UK REIT regime is a natural fit with the government’s objective of increasing pension investment into productive UK assets.
“Excluding investment companies from the Pension Schemes Bill risks limiting choice and undermining that objective. Listed closed-ended funds are already a proven, transparent and well-regulated route for pension capital to support real assets at scale. They should be part of the toolkit available to pension trustees, not excluded from it.”
Stephen Packwood, Partner at Schroders Greencoat, which manages Greencoat UK Wind, said: “Greencoat UK Wind invests in UK wind assets that generate long-term, predictable cashflows – characteristics pension schemes seek. The investment company structure is well suited to owning and operating these assets at scale; it gives pension fund investors access to productive UK investment with liquidity and price transparency, without the structural complexity often found in open-ended vehicles. Including investment companies in the Bill would ensure pension savers can access productive UK assets and support national priorities such as energy security and decarbonisation.”
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Notes to editors
- The Association of Investment Companies (AIC) represents a broad range of investment trusts and VCTs, collectively known as investment companies. The AIC’s vision is for closed-ended investment companies to be understood and considered by every investor. The AIC has 276 members and the industry has total assets of approximately £268 billion.
- For more information about the AIC and investment trusts, visit the AIC’s website.
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