A major proposal from the London Stock Exchange Group (LSEG) and over 100 top UK business leaders has hit strong resistance from pension funds — highlighting a critical debate about growth, risk, and the future of UK investing.
🔍 What Was Proposed?
Business leaders urged the government to mandate that UK defined-contribution pension “default funds” allocate at least 25% of assets into UK investments — aiming to stop the long-term decline in domestic equity ownership.
If implemented, this would channel £76–95 billion into UK equities by 2030.
⚠️ Why Pension Funds Reject It
Pensions UK says the proposal prioritizes markets over savers:
“Requiring a fixed minimum risks reducing returns. Savers’ interests are being lost in this debate.”
Key concerns:
- Mandatory allocations could increase risk
- Schemes already invest where returns are most attractive
- Overseas markets — especially the S&P 500 — have vastly outperformed the FTSE 100 over the last decade
📉 The Bigger Picture
UK pension allocation to domestic stocks has crashed from:
- 53% in 1997 → 4.1% today
- Global average: ~13%
Why?
Past regulations nudged funds into gilts, while global markets offered better returns.
Even industry bodies warn political pressure must not override fiduciary duty:
“Savers must remain at the heart of all policy decisions.”
🧭 What’s Next?
The UK government wants more domestic investment to support growth — but mandating where retirement savings go could create a major policy clash with pension trustees and financial institutions.
For now, performance, not patriotism, remains the guiding principle for pension capital.