Recent reforms have focused heavily on private markets and infrastructure. These are important, but the UK stock market also supports growth, and it is easier for schemes to use and for members to understand. A new report from New Financial argues that the government should revisit the role of listed equities in the pensions investment and UK growth agenda.
The report highlights a sharp decline in domestic investment. Ten years ago, DC pensions held around 40% of their equity portfolios in UK companies. Today, that figure is closer to 9%. Across all assets – including bonds, property and cash – UK equities now account for just 4.9%, or £33bn out of £670bn in total DC assets. By comparison, other countries invest a much larger share of pension savings at home. In the UK, regulatory and cost pressures have encouraged global market-weighted approaches, reducing the natural flow of capital to listed firms.
There are strong reasons to consider reversing this trend. Listed companies employ millions of people and raise money for investment through the market. A healthier domestic market could help mid-sized and growth businesses stay and expand in the UK. For savers, seeing more of their pension invested in familiar companies could also make pensions feel more tangible.
Any change involves trade-offs. The main concerns around diversification, fiduciary duty, political involvement, and the risk of underperformance apply to both listed and private markets. UK equities may also be more exposed to volatility and political pressure if they lag global benchmarks. In addition, greater allocations could flow mainly to large established firms, supporting valuations but not necessarily generating new growth or jobs.
Private markets carry a different set of risks: illiquidity, high fees, opaque reporting, and heavy governance demands. These are harder for trustees to manage and fall directly on scheme members. Against this backdrop, listed equities may offer a more transparent and manageable way to channel greater domestic investment, even if they deliver less targeted growth capital.
New Financial suggests a UK-weighted default fund, with 20–25% of equities invested in UK companies unless members opt out. This could add £75–95bn to UK equity holdings by 2030. It would be simpler than mandating and closer to what savers already expect from their pensions.
If government wants pensions to support growth, the debate cannot focus only on private markets. Public markets remain central to the economy and deserve a clearer place in policy.
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