Spring Budget 2024 Pension Plans Face Backlash
Jeremy Hunt’s plans to increase transparency around pension fund investments could end up hurting the firms they aim to support, according to a new analysis. In the lead-up to the highly anticipated Spring Budget 2024, investment platform AJ Bell is raising concerns that proposed disclosure requirements may backfire on UK businesses.
Under measures outlined by Chancellor Hunt, pension funds will be forced to break out the geographic sources of their portfolio holdings. But AJ Bell warns this could have the opposite effect by discouraging schemes that have large stakes in domestic companies. With UK-focused pension returns lagging global averages, savers may shy away from plans with substantial British corporate exposure.
How Could Transparency Backfire?
AJ Bell research found insurance company pension funds invested in UK shares saw average returns of just 40.7% over the past decade, compared to 143.2% for those adopting a more international strategy. By publishing performance league tables spotlighting this disparity, worried pension managers could pull further away from supporting UK firms. At the same time, the government wants to prop up British business investment and close underperforming pension plans to new members.
While aiming to align pension priorities with wider economic goals, there are concerns mandating investment patterns would compromise retirement savers’ best financial interests. Fund managers argue their top duty is returns for members, not political agendas. With the Spring Budget 2024 approaching, AJ Bell’s warning flags the need for carefully balancing transparency, competitiveness and national interests to avoid any policy backfiring. Overall investment levels in UK equity have plummeted since the 1990s, so the consequences of further deterring pension support bear close monitoring.
