Mansion House reforms could deliver ‘huge benefit’ to UK, says pensions giant finance chief

Mansion House reforms could help deliver a “huge benefit” to UK pensioners, the finance chief of a FTSE 100 pensions giant told City A.M.

Pension cash has traditionally been shut out of start-ups due to the higher fees charged by private equity and venture capital money managers. However, regulators and politicians have been working together to get pension funds to invest at least five per cent of their managed assets in growth companies in the so-called Mansion House Compact.

“At the moment, within the way the rules are structured, we’re not allowed to invest any proportion of a customer’s investments into these productive assets,” Rakesh Thakrar, finance chief at Phoenix told City A.M.

“If the rules and regulations allow us to change that that could be a huge benefit. What we’re working on, is how do we actually facilitate and make this happen?”

The Treasury has estimated the reforms could increase pensions by over £1,000 a year. Thakrar said he did not expect a change in government to interrupt progress on Mansion House reforms.

“This is in the interest of everybody,” he said. “So I don’t expect to, but we won’t know until any change in government actually happens”.

The comments came after Phoenix delivered a strong set of annual results. The FTSE 100 insurance giant upped its dividend and set ambitious new targets for 2026.

The firm’s new goals included total cash generation of £4.4bn between 2024 and 2026, growth of 25 per cent, as well as an adjusted operating profit of £900m in 2026. This is the first time Phoenix has set an earnings target.

The new targets come after solid growth over the past few years. Last month, Phoenix revealed that it had met its long term cash generation target two years early.

Markets were impressed with this morning’s update, with the share price rising over nine per cent on the day.

The firm has undergone a slight strategy change over the past years. Phoenix was the UK’s largest consolidator of closed life insurance funds for years, which do not take on new customers.

These closed books were moved onto Phoenix’s more modern technology platforms, allowing the firm to benefit from efficiencies and economies of scale.

In 2021, however, with the acquisition of the Standard Life brand, Phoenix entered the market for new schemes, a market in which it hopes to expand.

In its annual results, the firm said it will “build the remaining capabilities required to deliver a full-service customer proposition”. It will also bring together its heritage business and its various open book businesses under one roof to realise further savings.

Thakrar said this helped to explain why the firm was confident about its longer-term prospects.

“We continue to win workplace business and that is driving the growth on the capital-light pensions and savings business,” he said.

He also said capital efficiency has improved “significantly”. In 2022, the firm wrote £4.8bn of premiums, spending just under £300m of capital. “In 2023, investing the same amount of capital…we actually wrote £6.2bn of premiums,” he said.