Spring Budget 2024: Hunt threatens ‘further action’ to unlock pension investment after disclosure plans
The Chancellor Jeremy Hunt said he could take “further action” to push pension funds to back British companies today as he confirmed plans to force them to publicly disclose their levels of UK equity investment in his Spring budget.
Speaking in parliament, Hunt said he will give new powers to the Pensions Regulator and Financial Conduct Authority to ensure better value from defined contribution schemes by “judging performance on overall returns not cost”.
“I remain concerned that other markets such as Australia generate better returns for pension savers with more effective investment strategies and more investment in high quality domestic growth stocks,” Hunt said. “So I will introduce new requirements for DC and local government pension funds to disclose publicly their level of international and UK equity investments.
“I will then consider what further action should be taken if we are not on a positive trajectory towards international best practice.”
Hunt’s comments today come after he first unveiled plans to force domestic funds to publish the geographic mix of their investment over the weekend in a bid to get more money flowing into Britain’s beleaguered stock market.
Under the proposals, set to be introduced by 2027, underperforming funds will also be blocked from taking on new business.
The push has already stoked a heated debate in the City over the extent to which pension funds should back UK-based companies after a slide in domestic equity investment over the past two decades.
Just four per cent of the stock market is now held by domestic pension funds compared to 39 per cent in 2000, according to think tank New Financial.
However pension industry figures have resisted suggestions they may be forced to back more UK companies. The sluggish returns offered by UK-listed companies have triggered warnings that investing more would run counter to their fiduciary duties to their members.
Reacting to the plans today, Philip Smith, defined contribution director at TPT Retirement Solutions, said there was a “a risk the Government’s policy to force schemes to publish how much they invest in the UK will conflict with its policy to compare scheme investment performance”.
“While many trustees will be open to investing more in the UK, we expect they will still prioritise the investment performance, in line with their fiduciary duty,” he added. “However, even if schemes do increase investment into UK equities, it may not provide the boost to the economy that the Chancellor hopes.”
One pension boss told City A.M last year that “it doesn’t make any sense to try and wind back to some anachronistic 90s situation where all UK pension funds were investing in UK companies.”
Prior to Hunt’s plans last week, the boss of the UK’s biggest private sector pension scheme, the £73bn Universities Superannuation Scheme (USS), also cautioned ministers over plans for reform.
Carol Young, chief executive of the £73bn Universities Superannuation Scheme, said she would have no problem with disclosures but would have “cause for concern” if ministers were to direct trustees as to where funds should be allocated.