Chancellor Jeremy Hunt said he has met industry leaders to discuss how the best returns for pension savers can be achieved “while driving growth in the economy”.
Posting on Twitter on Wednesday, the Chancellor said: “UK pension pots are the largest in Europe, and the second largest in the world, at £2.5 trillion.
“But international pension funds are currently taking advantage of investments in high-growth UK companies more than UK pension funds.
“So today I met with industry leaders to discuss how we can get the best returns for UK pensions savers, while driving growth in the economy.”
In 2021 former prime minister Boris Johnson and Rishi Sunak, who was then chancellor, asked big institutional investors to consider long-term investments in UK assets to help the economy rebound following the coronavirus pandemic.
They wrote at the time: “We need an investment big bang, to unlock the hundreds of billions of pounds sitting in UK institutional investors and use it to drive the UK’s recovery.”
Jason Hollands, managing director of Bestinvest by Evelyn Partners, said: “The UK is a vibrant market for start-ups, but such businesses are invariably acquired by larger, often overseas, companies, rather than scaled up to be domestic giants, because large investors like pension schemes and insurance funds are too conservative to put money behind them.”
Mr Hollands said that however desirable it might be to the UK economy to receive more investment in these areas, “private pensions funds are not there as piggy banks for the Government to achieve its policy objectives, their purpose is to secure a decent retirement for their members”.
He suggested that the Chancellor could have to rely more on incentives “rather than the stick of forcing the hand of pension schemes”.
Mr Hollands added: “The proportion of pension fund money invested in UK companies has dwindled over many years, for a variety of reasons, including changes to accounting standards that made old-style defined benefit (DB) pensions too expensive for businesses to continue with, and which placed risk minimisation as a key priority.”
In a blog posted earlier in June, Yvonne Braun, the Association of British Insurers director of long-term savings policy, said: “The ABI and its members share the purpose of driving change to help build and support a thriving society.
“But ideas for change need to be informed by clarity about the key features of the UK’s private pension system, and most importantly, by the appreciation that pension money is savers’ money, intended to secure their standard of living in retirement.
“The litmus test for any policy proposals therefore has to be that they deliver better outcomes for savers.”