Don’t give pensions to private equity firms, warns Royal London

A major mutual insurer has warned that investing savings in UK infrastructure and private equity is undermining the primary role of pensions.

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

The Pensions Act aims to increase returns for millions of pensioners by encouraging pension funds to invest more money in UK infrastructure and private companies.

“I do get a little nervous when someone else dictates how the money is invested,” O’Dwyer said.

‘With an estimated £3 trillion in UK pensions, it is understandable that pensions are seen as playing a powerful role in supporting UK economic growth. However, the primary role of pensions is to fund customers’ retirement.’

Royal London, which has more than 2 million pension customers, did not sign up to the previous government’s Mansion House Compact, a commitment to invest at least 5 percent of pension funds in unlisted shares by 2030.

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

The co-operative, which is owned by its customers, manages around £169 billion in savings.

Life insurer Phoenix Group and fund manager Schroders this week agreed to set up an asset manager to promote the compact and channel £20bn of pension money into private markets.