New UK pension scheme rules out hedge funds

LONDON, Sept 25 (Reuters) - Britain’s new Personal Accounts scheme, a plan for savers without a company pension, is “highly unlikely” to invest in hedge funds and private equity, said the head of the authority in charge of setting up the scheme.

The investment portfolio of the Personal Accounts scheme, which is set to grow to 150 billion pounds ($279 billion) in 50 years’ time, has not been decided, although the scheme has said its default fund is likely to consist mainly of index-tracking funds.

Tim Jones, chief executive of the Personal Accounts Delivery Authority (PADA), told Reuters on the sidelines of an industry conference: “My personal view is that it highly unlikely because that’s not where our low to middle income earners are.”

Hedge funds, which have been blamed for adding to current market volatility due to their role in short-selling stocks, are viewed by pension funds as a diversifier, although returns have been disappointing for many investors this year.

Jones also said the scheme is likely to offer around a dozen funds for savers to select from.

“I would be surprised if we ended up with more than 10-12 fund choices, but the default could be seven of those in some mixture. But we will consult on the various risk appetites that should be catered for,” he said.

He added that the delivery authority would raise the prospect of Shariah and ethical investments in its consultation which will be launched shortly.

The Personal Accounts scheme, which will be launched in 2012 for UK workers without any pension cover, was mooted following recommendations by a government backed commission in 2005.

It is aimed at low to middle income workers not covered by corporate pension schemes. Enrolment will be automatic, but members can chose to opt out.

The default fund is expected to gather around 90 percent of overall contributions through individuals failing to make specific investment choices. (Reporting by Raji Menon; editing by Jon Loades-Carter)