Jon Spain is a legend of our Government’s actuaries and one I have missed on this blog for some months. While Jon objects to HMG’s power grab on principle, he thought it would be interesting to look at how returns from US equities would have compared with UK equity returns. The results are briefly summarised in the attached piece. I am delighted to give him space to explain
At present, HMG are trying to gain the power to force UK pension scheme trustees to invest in UK companies rather than elsewhere. While I think such a power is inappropriate, I thought I’d look at what would have happened, comparing £1,000 either invested in UK equities (FTSE All Share Index) or invested in US equities (S&P 500 Index) and repatriated to UK. The timeframe considered is 15 years from end 1971 until end 2025. No allowance has been made for investment expenses or currency exchange fees (taken from St Louis Fed). Nor have I even tried to allow for the impacts of exchange control and the “dollar premium” before 1979, which would have lowered the returns from investing overseas even further (thanks, Con Keating).
Simple Example At the end of 1971, £1,000 is invested in UK equities for 15 years and the final fund is £9,769. The £1,000 is exchanged for $2,571 which accumulates to $11,787 which is then exchanged into £7,830 at the end of 1986. That the annualised US return of unfavourable. On the other hand, the reverse exchange rate from dollars to sterling almost doubled from 0.3890 to 0.6643, partially reducing the relative investment loss.
Exchange Rates These are charted as the picture above. Over 54 years, the end-year exchange rate varied between 1.1271 (end 1984) and 2.5705 (end 1971).
Final Fund Comparisons These are charted as the third picrure. In sterling, the UK {US} final fund amounts fell between £1,765 {£1,961} and £38,403 {£14,105}, averaging out at £7,053 {£6,449}. The grey figures show the statistics for the ratio of US to UK, which I would like to have added as a line related to the right-hand axis but I couldn’t work out how.
In 18 out of 40 cases, the US investment would have been less favourable than for the UK.
Jon Spain
Jon Spain 24 Mar 2026