Andy Burnham backs new pension fund investing £1billion of savers' money in British start-ups

It has been described as the first fund of its kind in the UK

Pension savings could soon be used to help Andy Burnham "reindustrialise" the country.

The Prime Minister has backed a new pension fund set to invest £1billion of savers' money in British start-ups.

The UK Scale-up Fund will target early-stage science and technology companies, helping them secure the funding needed to expand their operations.

Ministers claim the first-of-its-kind approach could deliver stronger long-term returns for pension holders while supporting Mr Burnham's ambition to "reindustrialise" Britain.

The fund would operate in a similar way to a venture capital vehicle, investing pension money in growing companies with the potential to generate future returns.

Railpen, Nest, Border to Coast, LGPS Central and Local Pensions Partnership Investments are among the major retirement funds preparing to participate.

Together, they manage hundreds of billions of pounds on behalf of pension savers and retirees.

The initiative is also supported by the British Business Bank and the Government’s Office for Investment.

Mr Burnham said: "This new fund would help unlock good growth in every postcode, connecting pension investment with the entrepreneurs and technologies that will reindustrialise Britain and create the jobs of the future."

The proposal means a larger share of pension assets could be invested in growing UK businesses instead of more established companies or conventional investments.

Chancellor John Healey argued that the fund could benefit pension savers while helping British companies secure the money needed to grow.

He said: "We have the third largest venture capital market in the world and this new £1bn fund will mean more British money to back British scale-ups and better returns for pension savers."

The scheme continues efforts by previous governments to channel more retirement savings into the domestic economy.

Supporters believe successful technology and science companies could generate stronger long-term returns for pension holders.

However, early-stage businesses are generally riskier investments, and returns are not guaranteed.

The pension funds, rather than individual savers, would decide how much money to commit.

Any effect on people's eventual retirement income would depend on the performance of the investments.