Rachel Reeves has been compared to the fictional Mafia boss portrayed in the film The Godfather over the way she is trying to force pension funds to buy UK assets.
Tom Selby, a pensions expert at investment platform AJ Bell, said there was ‘something a bit Vito Corleone’ about the Chancellor after it emerged that she could order schemes to invest their money in domestic deals if they did not ‘voluntarily’ bend to her will.
His comments came after the Treasury last week struck an accord with 17 of Britain’s biggest workplace pension providers to boost investment in private market assets.
They pledged to allocate at least 10 per cent of their default workplace pension funds to riskier investments, such as infrastructure and start-ups by the end of the decade. Half of this, or 5 per cent, is earmarked for the UK in what could amount to a £25 billion boost to the economy by 2030.
Pension funds have been criticised for being too risk-averse and not investing in home-grown ventures. But Reeves’ threat to compel them to invest in the UK has already been slammed by one of the plan’s signatories.
Dame Amanda Blanc, head of insurer Aviva, said the strong-arm tactics were ‘a sledgehammer to crack a nut’ and not ‘the right thing’ to do. Scottish Widows, another leading pensions provider, refused to sign up at all after previously backing a similar plan.
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The industry is concerned that any attempt by ministers to funnel workers’ pensions into Whitehall’s pet projects would clash with the legal duty of scheme trustees to act in members’ best interests.
‘We need to be honest with people,’ wrote Selby in Money Marketing magazine. ‘The UK economy is in a hole and the Government plans to use other people’s money to help dig it out.’
Selby later told The Mail on Sunday: ‘I feel uncomfortable that the Government is using other people’s money for political purposes. A sword of Damocles is hanging over every pension scheme.’
Selby, who is AJ Bell’s director of public policy, said: ‘If pension savers’ money is to be used for political purposes, it seems reasonable for those people to get something in return.’
A Government promise not to change tax relief or tax-free cash entitlements on pensions during this Parliament would be a start, he said.’
Meanwhile it has emerged that Reform UK will control town hall pensions worth more than £50 billion after the party swept the board in recent council elections.
Reform now has a majority of seats in councils from Durham to Kent and Lancashire to Lincolnshire. This means the party also holds sway over the committees that oversee how the pension pots of council workers are invested.
Many local government pension funds are committed to having a portfolio of assets with net zero carbon emissions by 2050.
But Reform councillors were elected in part on a pledge to scrap these environmental targets.
‘We are going to be looking closely at this and I’ll be very grumpy if these pension schemes have bigger deficits because they’ve been underperforming because of woke investments,’ deputy leader Richard Tice told the Financial Times.
The Treasury was approached for comment.
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