An investment bank boss had called for more pensions invesments in growing UK companies to boost the economy and deliver better returns for retired Britons.
Stephen Welton, chairman of the British Business Bank, said there is huge potential for more retirement savings to be invested in British businesses, as the UK has the second largest savings pool after the USA.
He told BBC Radio 4 there is an opportunity to “excite people about their pensions” by reallocating pension savings into growing enterprises, and in raising awareness about where pensions are invested.
He said: “What is your pension doing? if we start there, very quickly people are going to think well why is it invested in this company?
“That is step number one. That I think could lead to a lot more engagement in risk and opportunity.”
He explained that savings are a key part of investment and that Britons should avoid just putting all their savings in a cash account.
The investment expert said: “We’re doing really well starting up companies. There’s no lack of innovation or creativity in the UK, but once we get to a position which could be scaled up, that I think is where we’re stumbling.
“That is a lack of risk capital, it’s a lack of risk appetite, you could say management teams are equally not being ambitious enough.
“We need to see more liquidity in the stock market so that becomes a pool of capital that growing companies can access.”
He also said there needs to be more willingness to take risks and accept the possibility of investments failling as this is a “really healthy part” of investment growth.
Chancellor Jeremy Hunt announced last year his Mansion House reforms to open up pension investments, in hopes to incrase pension payouts by £1,000 a year.
The plans include opening defined benefit scheme investments in more productive asset classes with more investment providing equity capital for UK business.
Becky O’Connor, director of public affairs at PensionBee, warned previously that the reforms are a “shot in the dark”.
She said: “The Government suggests that the approach will lead to an ‘everyone’s a winner’ scenario, in which retirees get bigger pension pots and innovative UK companies get the capital they need to grow. But there are no guarantees this win-win result will play out.
“While riskier, early-stage investments could generate growth and higher pension pots over the long term, there is also a chance that some of these investments may perform badly.”
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