Far too little national pension scheme capital is currently being spent on businesses within the UK, Andy Haldane, president of the British Chambers of Commerce, has claimed in a speech.
Haldane referenced statistics showing that in 2000, over half of UK pension assets went into UK equities, while currently it is less than 5 per cent. He claimed that in money terms, that is a divestment from UK companies of more than £2.5 trillion, roughly the market cap of every UK-headquartered listed company.
He also compared this position to that of nations such as Canada, Australia, and Japan, in which pension schemes invest between 20-40 per cent of their assets in domestic companies.
“The most striking thing about the UK’s large and mature pension system is that it is only system in the world without a home bias,” says Haldane.
“It is the ultimate irony that Canadian, Dutch and Australian pension funds today invest more in brilliant British businesses than do UK pension funds.”
While reforms to pension funds including the Mansion House Accord and the Pensions Schemes Act 2026 are designed to encourage pooling of funds and domestic investment, Haldane also claimed they would only have “modest quantative impact” in reshoring pension scheme assets.
Haldane instead proposed tax relief reform, in many ways mirroring the regime prior to 1997, shifting the balance of investment incentives towards UK companies, while still leaving those choices in the hands of asset managers and pension fund trustees.
“This is not about overly constraining investment choices. It is about correcting the absence of “home bias” that, at present, distinguishes the UK pension system from all others around the world. And, as best we can tell, no-one more would be more supportive of such a shift than those whose money it is – households.”
According to BCC research, more than 70 per cent of British investors expressed that they would prefer a pensions system favouring UK companies. Indeed, many mistakenly believe more than 40 per cent of their pension is already invested in UK companies.
