So runs this morning’s headline in the FT (Mary McDougall). The argument that has been put forward by Pensions Minister Torsten Bell and argued for by political economists such as Will Hutton. The debate by an FT journalist (Jo Cumbo) and Will Hutton at the Pensions UK conference this autumn went down these lines.
ordinary people outside the Bank of England
The UK, Canada, the Netherlands and Germany are among countries that have spotted an opportunity to redirect large and growing pension savings pots towards domestic investment to try to kick-start economic growth and funnel cash to sectors such as technology, defence and green energy.
There have been many movements from within pensions to ensure pensions have a purpose, these are lobbies on the CIOs of Pension Funds but there have also been lobbies on retail savers (I responded and am in fossil fuel free investment funds). What pension funds have found objectionable is not the lobby groups but the threat of legal mandation from above – from Government.
Steve Webb is a Liberal , the Labour party are not liberal, it is hardly surprising that there are many to the right of the liberals who have more extreme view than Webb but let us take Webb’s comments as the middle ground
“It is already hard enough to get people to lock money away and save for the long-term, and confidence in pensions could be seriously undermined if savers believe that their best long-term interests are no longer the top priority of their pension scheme,” said Webb.
This I think is too liberal for most of us. When people found that only 3p of the pound spent went to UK companies when saving with NEST (a Government pension to most people), savers were outraged.
In a week when the UK’s main stock market, tracked by the FTSE 100 index, reached new levels and crossed an important mark of 10,000 points, many people will feel they are missing out
Closing data for January 6th 2026.
If people have a fright, it is that diversification into market weighted global equity funds has found more of their savings in the magnificent seven in California than in Europe (and particularly in the UK). I have over 7% of my fund in one stock (Microsoft).
Webb’s argument that an unconstrained investment strategy that doesn’t channel money into the UK may have worked well as the AI bubble inflated but many (myself included) are not sure that the bubble will stay inflated for ever.
When bankers argue against intervention…
Perhaps the loudest voice for a lack of intervention from Government in how pensions invest has been Lloyds Banking Groups CEO who is reported by the FT thus
Charlie Nunn said last year that compelling pension funds to allocate to certain assets would be “a form of capital control” and a “difficult slope for an economy that believes it is an open economy”.
Actually, the UK economy is not so dominated by its funded pensions as many of the others it compares with in the OECD
What is different about the UK pension system is that its largest part (in terms of funds) is still in mature DB plans which , to meet the requirements of the Pensions Regulator for low dependency on employers, are invested in low growth sectors , the result of which has been fairly disastrous (see recent blogs on DB performance following an article in the Times)
This is where I find Government intervention in the investment of our pensions and it is not through mandation but through much more insidious influence. The 2021 Pensions Act made it a criminal offence for trustees to invest imprudently, this has made for a legal objection against trustees investing in growth stocks if it can be argued that it puts the member in danger of putting the scheme in deficit , putting the sponsoring employer in trouble and calling on the PPF to bale out pensioners.
I find the bulk of the FT’s argument show how this Government is swimming in a tide that includes a large part of the Western globe.
In Canada, Prime Minister Mark Carney has launched a “Buy Canada” campaign that prioritises local products for procurement with the aim of making it “the strongest economy in the G7”. In December 2024, Ottawa said it would remove its 30 per cent cap on owning Canadian entities.
The country has also set up a so-called Major Projects Office to fast-track national infrastructure projects and reduce the uncertainty around such programmes, as a way of encouraging investors such as pension funds.
But more pertinently it includes the investment officers of some of our major financial institutions not covered by the legal wrath of Pension Acts and of the regulation that sits behind our laws.
Energy independence and security have been “chronically underinvested in the UK and Europe for decades”, said Mike Eakins, chief investment officer of pensions firm Phoenix Group. “There will definitely be a desire of policymakers for private pension capital to invest more domestically.”
Intervene – Why not? That’s why we elect politicians to parliament
Policymakers in parliament are entrusted by us to get things done, trustees do not have authority to go against the law – created by those who they also have duty to.
UK markets have moved forward recently
Of course trustees don’t respond well to being told what to do and if there were really a conflict between maximising outcomes for DC members and allocating to UK Growth assets, commentators would be right to raise the alarm. But in reality, the interests of DC members and growth in the UK economy are closely aligned. Trustees have an obligation to seek to maximise their members’ standards of living in retirement, NOT to maximise their size of their pot, regardless of the standard of living it can secure in the country in which they are going to retire.
PE and VC allocations will typically be drawn from global listed equity allocations, adding diversifying return drivers. A solid UK overweight relative to listed equities (given that the UK represents the second largest investible private market in the world) is unlikely not to be in members’ interests……..
But pension trustees have more regulations and guidance than anyone! They seem to lap it up – I live with one – constant learning how to behave!
The real argument for investment realignment away from the USA is The AI boom, dollar’s ( and the pound?) decline and sticky inflation.
Ah – Pensions Act 2021 !
We need much less regulation/mandation, not more.
We mandated our way into derisking our pension system because it suits the insurers, to the detriment of pensions ( remember those – our actual job!) and economic growth.
The criminalisation from the 2021 Act is a destructive own goal by
DWP. I challenged regulators at the time, who’d say it was only needed to get into line those few pesky stubborn trustees, the ones who would not properly derisk into LDI, and tried to keep on investing. There was no apology to those schemes post October 2022 of course when the LDIers lost half their assets.
But once in, it gives power to the State (even if they do not know how to direct it) and although it is catastrophic for growth,no one in policy will give the energy to remove it, and of course the insurers will trick and pressurise a weak DWP into maintaining everything that suggests solvency level of funding is the target.
Less mandation, more incentives to invest and more growth.