Jeremy Hunt’s efforts to urge more pension funds to “buy Britain” risk going too far and leaving retirees worse off, the world’s biggest asset managers have warned.
BlackRock, which manages the pensions of one in five Britons, said it would be wary if the government forced funds to hold a certain amount of British shares.
The move comes after the Chancellor’s decision to force some pension funds to disclose the amount of their investments in British shares.
Mr Hunt has made clear his aim for pension funds to invest more in UK assets in a bid to boost growth, and has vowed to take further action if the situation does not improve.
This has led to speculation that the government may require funds to invest a certain percentage of their assets in the UK stock market.
Antony Manchester, a former Treasury official and now head of UK public policy at BlackRock, said he was concerned that such measures risked making pensioners even worse off in retirement.
Speaking at an event hosted by the Bright Blue think tank, Mr Manchester said: “We manage pensions for around 12 million people here in the UK and we strongly believe that pensions are meant to give people a decent retirement. [we are] I’m a little concerned about the suggestion that managers could be forced to invest in assets that they don’t believe will provide the best return for end investors. ”
Asked by Mr Manchester at an event hosted by UK Finance, Municipal Affairs Minister Bim Afolami insisted the government was not planning such a move.
He said: “I’m not talking about forcing someone to do something. Transparency will be a very important tool, that’s what we’re talking about. We’re not talking about forcing someone to do something. I’m not going to order you to do that.”
British pension funds currently invest just 6% of their money in British shares, compared to 53% in 1997.
Experts blame the decline on a wave of regulation that diverted money from riskier stocks to safer investments such as bonds.
But wealth managers are also turning their backs on the UK stock market after years of poor performance. The King’s bank, Coutts, highlighted this trend last month when it announced plans to move nearly £2bn from the London stock market into better-performing overseas assets.
A BlackRock spokesperson said: “We support measures aimed at attracting and encouraging pension investment in the UK. This will improve the economy while delivering better retirement outcomes for end investors. We can contribute to revitalization.”
“However, it is important to balance the call for more investment in the UK with the need for pension schemes to make investment decisions based on member interests.”
Afolami also called on regulators such as the Financial Conduct Authority to do more to foster economic growth.
The regulator was recently ordered to consider the health of the UK economy when making decisions.
“Rest assured, if things do not unfold the way we all want them to, we will move further if necessary,” Afolami said.
