Force pension funds to back Britain, bosses tell Reeves

Rachel Reeves should force pension funds to plough savers’ retirement pots into British companies to deliver a £100bn boost to the London stock market, leading bosses have urged.

In a letter to the Chancellor, leaders from more than 250 companies including Barclays, GSK and Halfords said all “default” defined contribution funds should be forced to invest at least 25pc of their assets into British investments.

They said pension funds that fail to do so should be blocked from operating as “default” funds, which the vast majority of British workers automatically pay into through auto-enrolment schemes.

Forcing default funds to invest this way would mean most workers would see a portion of their pension payments being ploughed into UK stocks, bonds and infrastructure every month.

Workers would be required to opt-out of their employers’ default schemes to put their money elsewhere.

The letter says such a policy could see an extra £95bn invested in UK stocks over the next five years, in what would give a “vital boost” to Britain’s economy.

British workers paid almost £90bn into pension pots through their workplace auto-enrolment schemes last year, with the vast majority of all money saved through these schemes paid into “default” pension pots.

The letter was written by David Schwimmer, chief executive of the London Stock Exchange Group.

It follows the launch of Ms Reeves’s Mansion House Accord in May, which saw 17 of Britain’s biggest financial firms pledge to invest at least 10pc of workplace pensions into UK companies.

The Mansion House Accord was backed by Aviva, Royal London and Phoenix Group but faced opposition from Lloyds Bank, which refused to sign up.

Charlie Nunn, Lloyds Bank’s chief executive, later compared Labour’s pensions policies to the “capital controls” used by the Chinese Communist Party, which block money from flowing out of China.

Mr Nunn also warned that forcing fund managers to invest in certain types of assets could conflict with their duties to seek the highest returns for customers.

However, the letter said the policy could help create a “virtuous circle” that would boost Britain’s markets, which have suffered from an exodus of firms and a dearth of listings in recent years.

It says the policy would require no additional Government expenditure, while pointing to polls showing 72pc of British people support higher levels of investment in UK stocks through their pension schemes.

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