Britain's Chancellor, Rachel Reeves, will this week set out reforms to pension funds intended to funnel investment into the UK's infrastructure and private businesses, according to Treasury sources.
On Thursday, Ms Reeves will deliver a speech to leading figures in the City of London financial district, in which she is predicted to “spell out the next phase” of the Labour government's plan, following her promise in October's budget to “fix the foundations” of the country's economy.
She is expected to pitch “growth brought by unlocking private sector investment, including in our financial services industry, and growth brought about by reform – both of our economy and of our public services”.
The Chancellor is also expected to highlight “the untapped potential we have here in Britain, the opportunities available that can be realised, the partnerships that can be forged, the wealth that can be created” as “the prize on offer”.
This could include partnerships with economies in the Middle East, Europe, Asia and the US.
It's thought Ms Reeves will also use her first Mansion House speech to announce measures that would get those currently economically inactive back into work and plans to strengthen the government’s new industrial strategy.
The Chancellor visited Canada in August and is thought to favour the pension fund system there, which includes the pooling of local authority pension money together to create “super pension funds” capable of making large-scale, long term investments in areas such as infrastructure. Amalgamating Britain's local authority pension funds would create a pot worth in the region of £400 billion.
Some in the City of London favour freeing up the £225 billion of surpluses held by old-style company final-salary, or defined-benefit, schemes which could be put to use in the economy, albeit with regulations to mitigate risk.
Experts at the Pension Insurance Corporation, a specialist insurer, have suggested that merging local government pension schemes, currently controlled by 86 small funds, could release £200 billion to boost the UK economy by reducing excessive spending on fund managers and advisers.
National insurance criticism
Ms Reeves's Mansion House speech will come just weeks after an increase to employers' national insurance contributions were announced the budget. The hike in the payroll tax was criticised by several company bosses, particularly in the hospitality sector, warning of potential job losses, while the Treasury estimated it could raise more than £25 billion.
Employers' NICs are rising from 13.8 per cent to 15 per cent, and the threshold at which employers start paying the tax will come down from £9,100 per year to £5,000.
In an open letter to the Chancellor on Sunday, 14 board members of the industry body UK Hospitality, as well 209 businesses in the sector, including JD Wetherspoon, IHG Hotels and Resorts and restaurant chain Tortilla, warned that “changes to the NICs threshold are not just unsustainable for our businesses, they are regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely upon”.
“We know you are determined to ensure that growth is available to all,” the letter said, “yet this change to NICs does the opposite, balancing the books on the backs of the businesses which provide jobs to all in society, nationwide, while sparing businesses that used technology to shed jobs.”
Meanwhile, Britain's Sunday Times newspaper claimed the rise in NICs will cost the supermarket chain Tesco, which is the UK's largest private sector employer, an extra £1 billion over the next five years. Last week, the chief executives of Sainsbury's, Asda and Morrisons detailed the added NIC costs they face, which combined will be around £1.3 billion over the next five years.
Palestine and Israel - live updates
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
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