The inability of UK pensions to invest in VC funds has resulted in a huge lack of capital flow into the economy, says Catherine La Torre, CEO of British Business Bank (BBB).

Speaking on a panel at the ScaleUp Week 2021 conference, La Torre warned that UK pension funds are missing out on growth opportunities and potentially luctrative venture capital returns. High growth companies are also being restriced from VC funding and expertise that could help them grow to fulfil their potential. “We're starving our scale-ups of a source of capital,” the CEO said. 

According to research carried out by BBB, if pensions plans would allocate 5 per cent of their assets to growth companies, performance for their beneficiaries would improve by between 7 and 12 per cent.

La Torre said that 55 per cent of VC funding in the UK over the last 10 years has come from foreign pension plans. This means US and Canadian savers are able to make higher returns on the UK’s start-up successes than local pensioners. “It's definitely frustrating that our domestic pension plans aren't quite getting it," she says.

This year, the British government has made commitments to change the current pensions regulatory environment, but La Torre says this is not going to be enough. “It's a start. But there are other things that we're going to have to do as well to to move the dial here in terms of behaviours and former strategies.”