British pension funds have been urged to back UK companies – or risk a punishing tax raid in the Budget this autumn.
Government figures show 20 per cent of a typical workplace pension pot is invested in the UK – down from 50 per cent a decade ago – with 8 per cent in equities.
Much of the rest of the money is invested overseas, including in big US funds with exposure to tech companies such as Amazon, Microsoft and Nvidia.
The lack of investment by pension funds in the UK has been identified as one of the reasons why the stock market is struggling.
Former pensions minister Baroness Altmann urged fund managers to put more money into UK stocks – or see tax reliefs hacked away by the Chancellor in a desperate attempt to raise revenues.
That would be a devastating blow to millions of workers who can save for their retirements tax free.
Abandoning Britain: Government figures show just 20% of a typical workplace pension pot is invested in the UK – down from 50% a decade ago – with 8% in equities
Speculation is mounting that Rachel Reeves will target tax breaks on pensions in this autumn’s Budget to help fill a gaping black hole in the nation’s finances.
‘Obviously these reliefs are under threat if things carry on as they are,’ said Altmann, adding that 25 per cent of new pensions contributions each year should be invested in Britain.
She said: ‘I don’t understand why our pension funds think it is perfectly fine to take billions of pounds of taxpayer money and do nothing to benefit the UK economy with it.
‘It seems to me that asking for just a quarter of the new money to be invested in our great British businesses and growth assets is not exactly unreasonable.
‘If pension fund managers, however, don’t believe Britain can deliver decent returns, they can invest more than 75 per cent abroad, but won’t receive money from taxpayers.’
Last week it emerged Scottish Widows is reducing the allocation to London-listed shares in its highest growth portfolio from 12 per cent to 3 per cent.
A report by the Government in November found only around 20 per cent of savings in workplace defined contribution pension schemes is invested in the UK.
The report found that this compared with domestic holdings of 22 per cent in Canadian schemes, 42 per cent in New Zealand and 45 per cent in Australia.
The lack of UK money going into British stocks has been identified as a reason why so many London-listed companies are undervalued.
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