Govt to consult on further changes to pension scheme charge cap

The government has confirmed that it will consult on further changes to the regulatory charge cap for pension schemes in an effort to unlock institutional investment to drive innovation.

In his Budget speech, Chancellor, Rishi Sunak, confirmed the government's intention to launch a consultation on further regulatory changes in order to "unlock institutional investment whilst protecting savers".

The consultation will consider options to amend the scope of the charge cap so that it can better accommodate "well-designed performance fees" to ensure pension savers are able to benefit from higher investment returns, as well as providing support for UK businesses.

The government is also expected to continue wider policy work to understand and remove various barriers to illiquid investments.

Delivering his Budget speech, Sunak said: “There is more to becoming a science superpower than just what the government spends on research and development.

"Our ambitious net-zero strategy is also an innovation strategy, investing £30bn to create the new green industries of the future. We’ve just issued our second green bond making us the third-largest issuer of sovereign green bonds anywhere in the world.

"London last week was named the best place in the world for green finance and on Monday the new UK infrastructure bank announced its first-ever investment, £107m to support offshore wind in Teeside. And to build on this work, one-week today I’ll be hosting global finance ministers and businesses at COP26.

"Innovation comes from the imagination, drive and risk-taking of business. That’s why we have launched help to grow to turbocharge small and medium enterprises (SME) activity, started a new co-investment venture capital fund, Future Fund breakthrough.

"It’s why I am announcing today, we will consult on further changes to the regulatory charge cap for pensions schemes, unlocking institutional investment, whilst protecting savers.

"It’s why we’re introducing a new £1.4bn global Britain investment fund, supporting transformative economic activity and our world-leading sectors like life sciences."

HM Treasury confirmed that public research & development (R&D) investments were expected to increase to record levels of £20bn by 2024-25 to create 'high-wage, high-skilled jobs of the future'.

This will be combined with R&D tax reliefs, meaning that total UK government R&D support as a proportion of GDP is forecasted to increase from 0.7 per cent in 2018 to 1.1 per cent in 2024-25.

The government previously consulted on measures to allow occupational defined contribution (DC) to smooth performance fees within the charge cap earlier this year, with a further consultation from the Department for Work and Pensions since seeking views on the broader direction it should take on the future structure of charges that are permitted within the charge cap.

The role of pension schemes in 'building back better' has been previously highlighted by the government, with Prime Minister, Boris Johnson, and Sunak recently challenging UK pension schemes to create an 'investment big bang'.

More details to follow when possible...

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