Re-introducing tax credits on dividend payments and cutting stamp duty on UK share purchases are among 10 recommendations the Pensions and Lifetime Savings Association (PLSA) has made for using investment and fiscal incentives to encourage pension schemes to allocate more of the nation’s savings to UK assets.
A debate about a perceived under-investment by the £3trn UK pension sector in British companies has been ongoing since early 2023.
Pension funds already invest around £1trn - a third of their total assets - in the UK, with a large share going into government bonds, which help fund public services, and also to corporate bonds, public and private equity and property.
Through its Pensions Investment Review, the government is currently exploring how the pension system might support greater investment in the UK, particularly in private markets.
The PLSA said it was essential pension funds maintained the freedom to take investment decisions that meet the needs of scheme members and savers.
Ahead of the budget the Association has proposed a range of investment and fiscal incentives which the government could undertake to encourage greater flows of pension investment into the UK.
Nigel Peaple, chief policy counsel at the PLSA, said: “There are many levers the government can pull to catalyse pension fund investment in the UK. Well-designed investment and fiscal incentives, focused on creating long-term value for pension savers, have the potential to swing UK assets back into favour versus similar opportunities globally.
“Looking overseas, it is no coincidence that a country such as Australia, which has a clear fiscal incentive for investing in the local economy in the form of a generous dividend tax regime, also has one of the highest pension asset allocations to domestic shares.
“We ask the government to back its UK growth mission with a bold and creative stance on pension fund investment that will work for UK pension savers.”
