Our report with the British Business Bank provides an in-depth assessment of the case for defined contribution (DC) pension scheme investment in venture capital and growth equity, and proposes solutions to overcome key risks and challenges to access.
It aims to enable better long-term retirement outcomes for the UK’s defined contribution pension savers, with a focus on commercial solutions that could be implemented in the private sector.
Key findings of the report
- Retirement savers in defined contribution pension schemes are missing out on higher returns. Retirement savings could be increased by 7-12% for a 22-year old if their DC pension scheme made 5% of investments in the UK’s fastest growing and most innovative companies.
- The UK’s defined contribution pension schemes are not investing in the UK’s fastest growing and most innovative companies.
- To become viable on a mass scale for defined contribution schemes, access to venture capital and growth equity funds needs to be improved.
Recommendations
- Information: The British Business Bank, supported by the BVCA and venture capital and growth equity funds, will continue to improve the quality and availability of industry-level data on historic returns of the asset class.
- Education: As data improves, investment consultants, data & analysis providers and trade bodies can better educate DC scheme trustees on the value and nature of venture capital and growth equity funds.
- Regulation: Regulatory changes should be prioritised to facilitate venture capital and growth equity investments.
- Industry Change: DC schemes can use their scale for good to create pooled investment vehicles and develop reduced fees with DC-centric structures.
The report analyses the performance of more than 5,000 venture capital and growth equity funds globally. Interviews were undertaken with experts from more than 50 organisations across the pensions and venture capital and growth equity sectors, as well as regulators and those in government.
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