Chancellor Rishi Sunak has said he wants to change the way pension funds operate, allowing them to invest more in tech start-ups.
Pension funds are crippled by regulations that limit them when it comes to investing in large-scale tech companies.
Announcing the fall budget this afternoon in parliament, Sunak said the Treasury would consult on further changes to the regulatory burden cap for pension plans, freeing up institutional investment in growing companies. .
Previously, Mr. Sunak said Business Growth that it was up to anyone who contributes to a pension to tell pension funds that they want some of their money to be invested in tech start-ups.
Relaxing the regulatory burden cap for larger pension plans could unlock some of the £ 2.2bn currently barred for higher risk and less liquid start-ups.
Direct contribution pension plans will have £ 1 billion under management by the end of the decade. If just 3% more of this funding went to venture capital, that would represent a £ 30bn increase in the equity investments available to startups. Pension funds contribute 65 percent of the capital in the US VC market, but only 12 percent in the UK.
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Sam Dumitriu, Research Director of The Entrepreneurs Network, said: “Right now there are significant regulatory and cultural barriers that prevent pension funds from investing in venture capital. The pension expense cap can protect savers, but it is too rigid and inconsistent with venture capital fee structures. Modest reforms, such as spreading the fee cap over several years and relaxing regulations on valuing illiquid assets, could unlock massive investments in innovative technology companies.
Mr Sunak also confirmed that the UK’s target of spending £ 22 billion a year on research and development would be delayed by two years until 2026-2027. Public sector investment in R&D would reach 0.7 to 1.1% by the end of the legislature.
Separately, the Chancellor has also extended R&D tax credits to help encourage investment in cloud computing and data costs. He added that he will ensure that investments resulting from the tax break are spent in the UK rather than overseas.
Moray Wright, CEO of venture capital firm Parkwalk, added: “With the combined strength of the openness of pension fund investments in innovative UK companies of the future and a continued commitment to R&D spending, the Kingdom -Uni is in a good position to retain its crown of “scientific superpower”. These two initiatives complement each other as increased support for R&D investments combined with a larger investment pool of pension funds, increased support when they are ready to evolve.
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