Phoenix Group, the UK's largest savings and retirement business, and Schroders, the investment manager, have announced the launch of a joint venture called Future Growth Capital. This new venture aims to invest between £10 billion and £20 billion of pension funds in high-growth, unlisted UK companies over the next ten years.
The initiative builds on former chancellor Jeremy Hunt's "Mansion House compact," a deal struck last year to encourage major UK pension fund managers to invest in fast-growing businesses. By focusing on unlisted assets, the venture seeks to deliver higher returns for savers while supporting smaller UK companies and driving economic growth.
The fund plans to invest in a variety of sectors, including green energy, windfarms, solar, property, and small businesses. This approach aims to tap into the potential of the vast number of medium-sized firms in Britain, which far outnumber those listed on the London Stock Exchange.
The plans have received broad support from both the Conservative and Labour parties. Chancellor Rachel Reeves welcomed the announcement and emphasized the importance of pension fund money working harder for people and the economy.
Future Growth Capital will launch with an initial £1 billion in pension money committed by Phoenix Group, with plans to allocate up to £2.5 billion over three years. The investments will be made both in the UK and globally.
Phoenix Group intends to invest 5% of its relevant savings products, worth approximately £50 billion from defined contribution pensions pots, in unlisted assets, which are believed to offer better returns than traditional equity investments.
Andy Briggs, the chief executive of Phoenix Group, highlighted that UK pension savers have historically received lower returns than their counterparts in countries like Australia and Canada, partly due to lower allocations to private assets. He expressed hope that Future Growth Capital will help deliver higher returns and a more diversified portfolio for UK savers.
Peter Harrison, the chief executive of Schroders, emphasised the importance of connecting long-term savers with innovative companies to support both retirement security and business growth in the UK.