Capital Markets Industry Taskforce Conference

William Wright, founder and managing director at New Financial compered the conference and presented interim findings of New Financial’s report on UK pensions and investing in UK equities. The presentation covered:

• An update on the current level of investment by UK pensions in UK equities and how that compares with domestic equities investment in other economies;

  
  

• The headline results of a New Financial commissioned poll of working adults with a pension that shows a) a broad lack of understanding of how pensions work; b) a disconnect between how much of their pension people expect to be (or think should be) invested in UK companies and how much actually is; and c) broad support for reforms to encourage more investment in UK equities by UK pensions;

  
  

• Analysis of five different options to encourage more investment in UK equities by DC pensions, the impact they could have, and the challenges they might face. These options included doing nothing, incentivising more investment through tax relief on pension contributions or increasing the tax free lump sum, mandating a minimum level of investment in UK equities, or introducing ‘UK weighted’ default funds;

  
  

• Headline analysis that shows there is no tension between taking a ‘globally diversified’ approach to investing and having a higher UK weighting than would be the case under a purely ‘global market weighted approach’.

At the CMIT conference, New Financial also hosted a workshop attended by more than 100 regulators, policymakers, and market participants from across the industry to debate the various options. The ‘UK weighted’ default fund option - in which DC defaults might have 20% to 25% of their equities allocation invested in UK equities (or roughly 12% to 15% of their assets in UK equities) - was the clear favourite. We would like to thank everyone who contributed to the discussion.

New Financial published a full version of the report 'How to boost investment in UK equities by UK pensions' in September including a detailed analysis of the practical legislative and regulatory steps the government would have to take on each option.

If you are interested in this report or hearing more about New Financial’s upcoming programme, please get in touch via: info@newfinancial.org

You can watch a recording of William's presentation below: