Still 'early stage' of UK efforts to tap pension pots for growth

LONDON, July 30 (Reuters) - Progress on boosting UK growth by channelling private pension cash into unlisted companies is being hampered by barriers that need removing, a first annual update showed on Tuesday.

Last July, then finance minister Jeremy Hunt said that under the 'Mansion House Compact' (MHC) nine insurers and pension funds would voluntarily commit to investing 5% of their direct contribution (DC) pension schemes in unlisted companies by 2030, a total of around 50 billion pounds ($64.29 billion).

Less than 1% of cash was invested in unlisted equity at that time.

The Association of British Insurers (ABI), charged with keeping track of progress in collaboration with the City of London, said on Tuesday the total was 0.36% by February, the basis for measuring progress in future years, given it was still 'early stage'.

The ABI said signatories, which now total 11 and include Aegon, Aviva, Legal & General, NEST, Phoenix and NatWest Cushon, currently hold 793 million pounds in unlisted equity assets in their DC schemes, out of a total of 219 billion pounds of assets.

"More investment in unlisted equity has been committed and is expected to grow," the ABI said in its report.

The new Labour government elected this month, which said on Monday it faces a 22 billion pound overspend in the country's finances, has backed the compact, and launched a review of pensions in a bid to increase private investment.

The ABI said signatories are putting in place expertise, setting up Long Term Asset Funds, undertaking research, and making other preparations to invest more in unlisted equity.

L&G launched a fund this month for DC savers, and Aegon announced in June plans to introduce private market investment into its largest workplace default fund from the third quarter.

Signatories said a key barrier is the focus among fund trustees and their consultants on costs of schemes rather than longer-term value.

It was "absolutely essential" therefore to get the planned 'value for money' framework right, the ABI said.

($1 = 0.7777 pounds) (Reporting by Huw Jones; Editing by Kirsten Donovan)