The British Business Bank (BBB) has launched a call for proposals to support the launch of the government’s Long-term Investment for Technology and Science (Lifts) initiative, which will aim to support defined contribution (DC) investment into "innovative UK companies".

The bank is seeking proposals from industry for the establishment of new funds or investment structures in UK institutional investment, particularly DC schemes, to support the growth of the UK’s "most innovative" science and technology companies.

An initial government-funded commitment of up to £250m is expected to be available to support one or more successful proposals in mobilising institutional investment into the UK’s science and technology companies.

The BBB has also invited managed fund proposals from DC pension schemes (or consortia) and from authorised asset managers that have at least one UK DC pension scheme willing to support the proposal by investing.

Announcing the call for proposals, the BBB emphasised that UK DC pension schemes currently hold more than £500bn of assets, estimating that this figure is set to double to £1trn by 2030.

However, it argued that, currently, UK schemes are under-invested in venture capital and growth equity in comparison to overseas schemes such as in Canada and Australia, despite the potential to enhance returns for their members and diversify their portfolios.

Given this, the Lifts initiative aims to unlock UK institutional investment and catalyse more investments from UK DC pension funds into venture and growth equity in a sustainable manner, as well as catalyse private investment into UK science and technology.

In addition to this, it will look to stimulate the UK venture capital ecosystem, sustainably increasing deal flow, developing the domestic venture landscape, and "nurturing" investment and entrepreneurial talent.

Commenting on the call for proposals, BBB CEO, Louis Taylor, said: “Lifts is an important initiative, with the potential to unlock billions of pounds of additional investment for the UK’s fastest growing science and technology companies, while also enabling the UK’s pension savers to benefit from the value created by UK innovation.

"The bank looks forward to receiving a range of proposals, and to supporting government with its wider package of ambitious measures to unlock DC pension investment into innovative firms.’’

The call for proposals was published alongside the summary of responses to the initial Lifts consultation, launched as part of the Spring 2023 Budget, which revealed that there was support for all four options outlined by the government, albeit to slightly varying degrees.

The government highlighted this as indication that, if some options were removed, there may be a risk that some potential applicants may not put forward bids and ultimately Lifts may not meet its objectives.

In particular, the Pari passu co-investment option was the most popular option of the four outlines, identified as a preferred option by twelve institutional investors and/or fund managers that responded.

Following the industry consultation, the government said that it recognises that unlocking institutional investment, particularly DC pension capital, is a long-term policy area, with further updates expected in this area in future.

"Departments will continue to progress with work on the wider productive finance agenda, of which the Lifts initiative is a part," it stated. "The Chancellor will provide further statements on this agenda in the coming months."

The initiative has been welcomed by industry experts, as Aegon chief investment officer, Tim Orton, highlighted the government's proposals as "encouraging".

“This, alongside a range of other initiatives, shines a light on the benefits of longer-term investment in sectors which have the ability support UK economic growth, move the dial on the transition to net zero and last but not least potentially improve returns for DC pension scheme members," he continued.

“This offers another option within the wider direction of travel, as many DC pension default funds across the industry including those offered by Aegon to employer clients, consider their options around diversifying into private equity while also advancing towards net zero commitments.”

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