PENSIONSANDSAVINGS.COM

• The chancellor could and should have been far more radical.  
• There is still no requirement to use any pension assets to back British growth. 
• Just merging pension funds is no guarantee of boosting returns or improving UK infrastructure.
  

Of course I applaud the Chancellors worth intention to facilitate more pension asset investment in higher expected return projects. Her radical reforms, however, could and should have been much bolder.

With £70billion of taxpayer funds going into people’s pensions each year, surely Government has the right or even a duty to make sure a significant chunk of that money is used to improve British growth prospects. This is especially at a time when the Government itself does not have enough fiscal firepower to do these long term investment projects itself. It would make good economic sense to use the money being spent on pensions for such purposes.

The Government need not mandate such a requirement but it could make this conditional on receiving the generous tax reliefs. If pension funds want the tax relief, they must invest at least a quarter of new contributions domestically in assets that can help revive our financial markets and long term economic growth. This can include large and small quoted companies as well as start up and scale up businesses and also infrastructure, social housing, sustainable energy and other illiquid early stage investments.

Australian and Canadian pension funds put far more in their own markets than we do as well as investing overseas. We could look to do the same.

Part of the weakness of our financial markets has been due to long term investors such as pension funds sellingUK equities either to buy lower return bonds or to diversify globally. This lack of domestic buying support has weakened our market performance and led to a de-rating of UK companies. We need to reverse the vicious circle which has seen more pension funds selling, because past selling has created underperformance. The requirement to buy British in exchange for tax relief would provide more support with regular inflows to British investments.

At least a quarter of every pension fund came from taxpayers and can be taken out tax free. Trusting a quarter of all new contributions to back our own country seems very sensible and would certainly be the kind of bold, radical, growth-boosting change that the Government wants.