(Bloomberg) — A British financial services lobby has urged Chancellor of the Exchequer Jeremy Hunt to support measures that will entice pension funds to invest more capital in local firms, stimulating economic growth.
The amount of risk capital being deployed by the sector into UK assets has been diminishing, with only 4% of all shares listed on the LSE held by pension fund and insurers in 2020, down from 39% two decades earlier, the Capital Markets Industry Taskforce told Hunt in a letter dated March 10.
The trend has resulted in poorer returns for pensioners and the consequence that funds “are not being utilized to drive the growth of the UK economy,” said the group known as CMIT, whose members include top City of London executives.
The CMIT is supporting the government’s proposed reforms to Solvency II rules, which would allow insurers to deploy more risk capital, it said. The group is also pushing for consolidation in the pensions industry, which would give funds the ability to “develop the sophistication required to assess growth investment opportunities.”
Hunt, who is slated to present his Spring Budget on March 15, is considering options on how to boost growth and avoid forecasts of a recession this year. The government is also seeking to support the country’s finance industry and bolster the City of London’s role as a global financial center.
