The trail blazed by Pension-led funding

A multi-billion pound boost for start-up companies and infrastructure projects from pension savings would be a catalyst for growth, says Clifton Asset Management chairman Adam Tavener.

Adam has welcomed Government proposals to potentially give more than 10 million members of Defined Contribution (DC) pension schemes access to more diverse and innovative investments.

Pensions Minister Guy Opperman has said members of DC schemes were missing out of the potential benefits of long-term investments in small firms, housing, green energy and sustainable development.

The Government is currently consulting on reforms which could see larger occupational DC schemes required to report on how much they allocate to the types of investment the Government is keen to encourage with assets in occupational DC schemes almost tripling since the start of 2011 and the success of auto-enrolment.

Adam said the Government should look for inspiration to Pension-led funding which has given business owners access to their pension pots to invest in their businesses for many years.

“It’s encouraging to see that the government is waking up to the potential impact that pensions could have as a catalyst for growth in the SME sector,” Adam said.

“In this case they are targeting larger defined contribution schemes to diversify part of their investment strategy into the SME lending space. It is worth remembering that through Pension-led funding SME owners have been able to access growth finance for many years now by utilising the business owners own accumulated pension pot, a process that has been adopted by thousands of small businesses already.

“SME lending is, of course, an inherently risky endeavour and appropriate processes to mitigate this risk should always be undertaken, whether the pension is a large collective scheme or the property of one or two directors. We would be happy to share our experience in this field if the DWP felt that it would be useful.”

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