Chancellor Jeremy Hunt unveiled a wave of pension and regulatory reforms in his Mansion House speech last night, going further than many expected.
The ‘Mansion House Reforms’ – as they have been called – will encourage pension funds to invest more in UK businesses and will reform areas such as small pension pots, decumulation and replacing the PRIIPs packaged product regime.
In his speech he welcomed a pact with pension providers to put 5% of their investments, up to £50bn, into high-growth businesses.
The Chancellor says the reforms will “unlock” capital for investment in “our most promising industries and increase returns for savers, supporting growth across the wider economy.”
Mr Hunt also promised reform and simplification of the financial services rulebook to build “the most growth-friendly regulation of any financial services centre, without compromising our commitment to stability.”
Mansion House Reform measures announced by the Chancellor include:
- an industry-led ‘compact’ committing many of the UK’s largest Defined Contribution (DC) pension providers to the objective of allocating at least 5% of their default funds to unlisted equities by 2030
- exploring demand for government to play a greater role in establishing investment vehicles
- publishing a joint consultation response with The Pensions Regulator and the FCA on a new Value for Money Framework for DC schemes
- publishing consultation responses on small pots and decumulation, applying additional requirements to DC schemes to support further consolidation
- publishing a consultation response setting out the intention to consult on draft regulations for whole-life, multi-employer Collective Defined Contribution (CDC) schemes
- publishing a consultation response on a permanent superfunds regulatory regime for Defined Benefit (DB) schemes
- issuing a call for evidence on the role of the Pension Protection Fund and the part DB schemes play in productive finance
- launching a consultation on accelerating the consolidation of Local Government Pensions Scheme assets
The government will also speed up the replacement of EU Regulation with UK legislation to “seize” the opportunities offered by Brexit.
Mr Hunt said: “Behind all these reforms must sit a financial services sector ready to innovate faster, with regulators willing and able to support them as they do. That is why the government is announcing a series of reforms to enable the sector to take advantage of the opportunities presented by the 21st century.
In terms of financial regulation the government is:
- publishing a delivery plan building on the Policy Statement launched as part of the Edinburgh Reforms
- laying a commencement statutory instrument repealing almost 100 unnecessary pieces of retained EU law from the statute book, including the European Long-Term Investment Fund Regulation and parts of the Payments Accounts Regulations
- laying a statutory instrument to give the FCA sufficient rulemaking powers, and the PSR sufficient powers of direction, for payment services and e-money to replace EU law is it is repealed
- publishing draft secondary legislation which will tailor the regulation of securitisation to the UK
- publishing the government’s response to the call for evidence on the Short Selling Regulation setting out the government’s plans to reform and replace this regime
- publishing a follow-up consultation on aspects of the Short Selling Regulation related to sovereign debt and credit default swaps
- publishing the government’s response to the consultation setting out the government’s plans to replace the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation with a new tailored UK retail disclosure regime
Further detail can be found on the Smarter Regulatory Framework.
The government says it wants to “supercharge” the modernisation of the UK’s financial services sector and will be:
- publishing a consultation on the new ‘Digital Securities Sandbox’
- announcing the launch of an independent review into the future of payments
- announcing that it has determined that the US’s Commodity Futures Trading Commission regime for clearing houses as equivalent to the UK’s
- publishing the interim report of Sir Douglas Flint’s Digitisation Taskforce, launched in response to Mark Austin’s Secondary Capital Raising Review
- publishing the City of London’s second State of the Sector report
Key Mansion House Reform Documents published today:
• The full text of the Chancellor’s speech can be found here.
