Speaking at The Investing and Saving Alliance’s annual retirement conference on Tuesday, 17 June, Mr Opperman said ministers are right to want pension funds to back British infrastructure and industry, but right now there’s little worth investing in.
In her Mansion House speech in 2024, Rachel Reeves set out plans to force pension funds to combine into “megafunds”, saying they could unlock £80bn of investment in the UK.
The Mansion House Accord flagged that 17 of the largest workplace pension providers in the UK have expressed their intent to invest at least 10 per cent of their defined contribution (DC) funds in private markets by 2030, with 5 per cent of the total allocated to the UK.
But Mr Opperman flagged that current investing options in the UK are limited or undesirable.
“This Government has made it difficult to invest in water companies by regulating them and then threatening chief executives with personal prosecution.
“On trains, the worry of nationalisation of all railways by Labour Government means pension funds are nervous of their investment being nationalised.”
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He says that investing in projects like nuclear energy could provide savers with stable, long-term returns while supporting the UK’s transition to clean, reliable power.
“One of the first things that landed on my desk in 2017 was the auto-enrolment review. And it took me only six years to get it into legislation, and it still isn’t in place now.
UK markets a ‘sword of Damocles’ over pensions
UK pension funds have dramatically cut their domestic equity holdings over the past two decades.
Today, DC schemes allocate just 8 per cent to UK-listed equities, private defined benefit (DB) schemes invest around 11 per cent, and local Government pension funds hold about 17 per cent.
Jason Hollands, managing director of Evelyn Partners, said: “There are a variety of factors that have led to this decline, including Gordon Brown raiding the tax credits pension funds used to receive on UK dividends, de-risking of pension funds so they are heavily invested in bonds and a move towards global diversification.”
He added: “It is possible that in due course the Government may lean on pension funds to invest more in the UK stock market as the pensions bill gives the Government reserve powers to introduce mandatory asset allocation.
“However, the threat of it hanging over them like Damocles Sword may mean they can be arm twisted to go further in backing UK assets.”
Mr Opperman acknowledged some progress, highlighting that ministers from both the Department for Work and Pensions (DWP) and the Treasury are now working more closely together.
He said: “The key question for all of us is, looking at the bill, looking at the way ahead – is the situation glass half full, half empty, or in this particular case, three-quarters full? For me, it’s the mere quarter full.”
The DWP and the Treasury have been contacted for comment.
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