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UK Pensions Set to be Incentivised for Home Grown Asset Investment

UK Pensions Set to be Incentivised for Home Grown Asset Investment

(22 February 2024 – United Kingdom) Chancellor of the Exchequer Jeremy Hunt is mulling plans to incentivise UK pension funds to increase investment in domestic assets.

The move represents part of UK government efforts to kick start economic growth and support Britain’s struggling FTSE equities market. Hunt is seeking to encourage pension schemes to allocate more of their capital in a way that boosts the domestic economy, as the government seeks to increase growth in the wake of a recession at the tail end of 2023 and ahead of an election expected later this year. The Chancellor is considering options such as mandating pension funds to disclose their allocations to different UK asset classes and launching an independent review to determine an appropriate threshold of UK asset allocation for pensions.

UK pension funds have been actively reducing their exposure to British equities over the past two decades, withdrawing £400 billion of demand over that period, according to a report by the New Financial. Since 2000, the share of the UK stock market owned by UK pensions and insurance companies has fallen to four percent from 39 percent.

“If you mandate it comes with risk on asset concentration, lack of supply and all sorts of things. Also, is it the role of the government to direct institutions to allocate money to a particular asset class? No, is the view of pension funds. There’s a lot of disclosure already required from pension schemes, duplication is not going be particularly helpful” commented said Pensions and Lifetime Savings Association Deputy Director of Policy, Joe Dabrowski.

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