Pension funds ‘should be forced to invest in UK’, says business secretary Peter Kyle
Business Secretary Peter Kyle sparked a City backlash yesterday after saying pension fund managers should ‘get off their high horses’ and invest in the UK or be forced to do so by law.
In comments that revive the prospect of ‘mandation’ – fiercely opposed in the pensions industry – Kyle said asset managers ‘should feel a patriotic duty in making Britain a success’.
The idea of forcing retirement funds to invest more in the UK has met strong resistance in the past from figures such as Aviva boss Amanda Blanc.
Opponents argue the decision on where to invest should be based on what brings the best retirement outcome for their members rather than serving a political purpose.
But Kyle told The Guardian: ‘I don’t think mandation is ideal in any circumstances. But I’ll use it if I have to, because I’m in a rush.’
Trillions of pounds are held in UK pension funds, but the proportion invested in Britain has sharply diminished.
Outrage: Business secretary Peter Kyle said asset managers should ‘get off their high horses’ and ‘feel a patriotic duty in making Britain a success’
Kyle said he was ‘fed up’ of being asked by the City for reforms to boost investment only for them to fail to gain traction.
‘They are representing British savers,’ he said. ‘And so they should feel a patriotic duty in making Britain a success.
‘They need to get off their high horses.’ But former pensions minister Steve Webb, now a partner at consultants LCP, said: ‘I think his comments are outrageous and ignorant.
‘Asset managers are managing other people’s money. They should not switch investments because they have been ‘told off’ by a minister.’
Laws this year gave ministers the power to mandate investment in UK assets – before being watered down by opposition – but cannot be used before 2028.
Yesterday, Simeon Willis, chief investment officer at pensions consultancy XPS, said: ‘We need to avoid a situation where pension schemes make decisions that lead to worse financial outcomes for their members, driven by a well-meaning but nonetheless unquantifiable perceived boost to UK economic growth.’
Tom Selby, director of public policy at AJ Bell, said: ‘People save in pensions to maximise their standard of living, not because they want to prop up UK businesses.
‘Politicians should be focused on reforms to make the UK a place people want to invest in, which would naturally lead to capital flows from pension funds around the world.
‘Mandating asset allocations is the lazy option.’
Former Bank of England chief economist Andy Haldane has criticised Britain’s pension system as the only one in the world without a ‘home bias’. He favours the use of tax reliefs.
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