After a protracted  phoney war, the FT has collared the UK  Chancellor of the Exchequer , Jeremy Hunt – to find out what he is actually planning for our pension system

Here are the headlines

1. No compulsion but plenty of impulsion
2. DC agenda based around value for money, consolidation and increased allocations to productive capital
3. Further consolidation of LGPS (pools)
4. No change for Corporate DB – it’s propping up the national debt

Here are the edited highlights of the FT’s interview with Hunt – with all the juicey pension bits kept in.

What Jeremy told the FT

The chancellor, in an interview with the Financial Times, said he wanted to work with the financial services industry to release capital for fast-growing companies, by changing rules that are holding back investment.

After months of speculation about his intentions, Hunt made it clear he would not order the City what to do or where to put its money. “This is about evolution, not revolution,” said Hunt:

“We are not seeking Big Bang II on this.”

Hunt has high hopes of an investment deal, to be announced on Monday by lord mayor Nicholas Lyons, the veteran banker and insurance executive, who has persuaded companies to commit up to £50bn to private equity and early stage businesses in areas such as fintech and life sciences.

The voluntary pact by some of the biggest players in the financial services sector to put 5 per cent of investments in defined contribution pension schemes into what Hunt calls “productive assets”, has helped to end fears in the City that the chancellor could instruct them to switch billions into privately owned high-growth companies.

Lord mayor Nicholas Lyons has persuaded companies to commit up to £50bn to private equity and early stage businesses

“We aren’t going to do mandation. The requirement that you invest a certain proportion of your assets in UK funds is not on the table.”

He said members of defined contribution schemes would enjoy greater returns if their savings were invested in high-growth companies, saying they should take the lead from Australian and Canadian equivalents.

But the chancellor said he would not be forcing UK funds to look inwards only to British investments. One of three “golden rules” he will set out in his Mansion House speech aims to respect how London is

“the most international of financial centres”… “There’s going to be a big commitment to invest in productive assets, but it will not be a UK commitment. You come to London because you have experts here investing all over the world, where they get the best returns.”

The City of London Corporation, the Square Mile’s local authority, on Friday talked about achieving “a modest 5 per cent allocation” of defined contribution scheme investments to private equity and hoped that “the majority” would be UK asset classes. While the Lyons initiative is a statement of good intent, does Hunt think a collaborative approach with the City alone will deliver his objective of getting billions more of the country’s savings into high growth companies?

“Yes,” he said, adding he would change the regulatory environment to achieve his goals. A series of government consultations and “calls for evidence” will begin this month and conclude in September, with decisions to be announced in Hunt’s Autumn Statement.

A second “golden rule” will state the reforms should be in the interests of savers to ensure they get the best returns, a vow intended to allay concerns in the City that Hunt might try to raid the country’s pensions and force them to invest in riskier assets.

“This is not an attempt to divert capital into productive assets in a way that would be detrimental to the interests of pension fund holders,”

he said. But he would change regulatory restraints

“on things like value-for-money requirements that are focused on fees rather than returns”,

which he said were “steering people away from less liquid, higher growth assets”.

Hunt meanwhile said he wanted to see Britain’s highly fragmented pensions market — with about 28,000 defined contribution schemes — consolidated and was prepared to get tough with inefficient funds if they did not do so voluntarily.

“We will look at whether there should be powers of intervention in situations where it’s highly unlikely a fund is able to get the returns it needs,”

he said. Australia and Canada again provide the model. Hunt will seek to merge some of the 80 or so local government pension funds. He will keep an open mind on more radical proposals for consolidation of funds and is likely to issue a “call for evidence”, but Treasury insiders said the chancellor is instinctively cautious.

One option on the table is a plan by the Tony Blair Institute, a think-tank, for tens of thousands of public and private sector pension plans to be pooled into “GB superfunds” that would invest in UK start-ups and other companies. Hunt’s third “golden rule” is a recognition that he still needs Britain’s old-style defined benefit pension schemes, where payments are linked to salaries, to carry on funding government borrowing.

In this area, Hunt said there will be

“no dramatic change”. “Those who invest in our gilts are helping to fund vital public services and support for households facing high energy bills,”

Hunt will say in his Mansion House speech.

“Any changes must recognise the vital role they play.” Britain’s debt now stands above 100 per cent of gross domestic product.