Pensions should not be handed over to private equity firms, Royal London warns

Investing savers’ money in British infrastructure and private equity risks undermining the central role of pensions, a leading mutual insurer has warned.

Barry O’Dwyer, chief executive of Royal London, said he was “nervous” about Labour’s proposal to restructure the pensions industry.

The Pension Schemes Bill aims to boost the returns for millions of pensioners by encouraging schemes to invest more money in British infrastructure and private companies.

“I’m a little nervous about someone else dictating how the money is spent,” O’Dwyer said.

“With an estimated £3 trillion in UK pensions, it is understandable that pensions are seen as having an important role to play in supporting the country’s economic growth. However, the primary function of pensions is to fund clients’ retirement.”

Royal London, which has more than 2 million pension clients, did not sign up to the previous government’s Mansion House Compact, a commitment to allocate at least 5 per cent of default pension funds to unlisted equities by 2030.

It has secured support from providers including Aviva, Legal & General and Scottish Widows, but Royal London felt it would not be in the best interests of clients.

The mutual fund, which is owned by its customers, manages around £169bn in savings.

Life insurer Phoenix Group and fund manager Schroders agreed this week to launch an investment manager to promote the pact and channel £20bn of pension cash into private markets.