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The MPs’ pension scheme has less than 3 per cent of its equity portfolio invested in UK shares, far lower than private sector peers, prompting claims that it is making “a mockery” of efforts by chancellor Rachel Reeves to encourage investment in the London stock market.
The £855.5mn Parliamentary Contributory Pension Fund had only £12.8mn allocated to UK stocks at the end of March, compared with £462.3mn in equities listed in other countries, according to its latest annual report.
That compares with an average allocation for private sector DB funds of 12 per cent in listed equities in the UK, according to research by the Pensions Policy Institute. The MPs’ scheme accounts show only a small shift towards domestic stocks from last year, rising from 1.4 per cent to 1.5 per cent across the whole portfolio.
The low allocation comes as the government has made pension policy a cornerstone of its plans to boost the economy, including by consolidating funds to drive more investment in Britain.
Sir Jeremy Hunt, a former Conservative chancellor who also tried to channel more pension savings into UK equities, said the MPs’ scheme should lead by example.
“If governments from both parties want pension funds to invest more in the UK, then it rather makes a mockery of things if the parliamentary pension scheme does the opposite,” he said.
Charles Hall, head of research at broker Peel Hunt, said: “It’s extraordinary that our own MPs have even lower allocation to UK equities than the average pension fund . . . It’s high time the MPs showed some leadership and backed UK companies.”
The trustees of the MPs’ scheme — who have ultimate responsibility for asset allocation — include powerful political figures in both parties, including Labour’s Dame Meg Hillier, chair of the Treasury select committee, and Dame Harriett Baldwin, her Tory predecessor in the role.
The government has included a range of measures to encourage more pension investment in UK assets in a bill to become law next year, including consolidating assets and taking a reserve legal power to set asset allocation targets if a voluntary approach fails.
Pensions minister Torsten Bell told the Financial Times on Thursday: “I’m sure all pension schemes, including the parliamentary scheme, will want to look hard at investing in UK assets.
“That is especially the case given this year has seen the FTSE hit record highs and significant momentum behind listings in London, from Magnum this week to Fermi, Prince’s Group, and Shawbrook.”
In May, the Treasury launched the Mansion House Accord, a voluntary commitment signed by 17 of the largest pension providers to invest at least 5 per cent of their assets in UK private markets by 2030, provided the assets were sufficiently attractive.
The Treasury said: “Our pension reforms will channel more of the nation’s savings into fast-growing businesses and vital infrastructure across the UK, securing over £50bn for the UK economy by 2030 and boosting retirees’ pension pots by nearly £30,000.”
Additional reporting by Ramsay Hodgson