More than 250 UK business leaders have signed an open letter calling on the Chancellor, Rachel Reeves, to do more to make defined contribution (DC) pension schemes invest in the UK economy.

The letter said that while the recent announcement of the Sterling 20 to support UK investment is welcome, and efforts such as the Mansion House Accord and the Pensions Bill are steps forward, more is needed to translate them into actual investment flows.

"We urge you to be bold," the letter stated, calling on the government to condition the privileges that are granted to UK DC pension scheme default funds upon them allocating a minimum 25 per cent of their default fund assets to UK investments - across each asset class.

It suggested that this could be done by introducing a requirement for all DC pension schemes to designate a "UK-weighted" fund as their default arrangement.

The signatories suggested that this would mean that it is not mandatory as individuals could choose to opt out of the default fund without losing any of their pension entitlements, clarifying, however, that the “default” starting point for DC pension schemes "must be one that is consistent with both driving savers’ returns and supporting a resilient domestic economy".

The policy would be expected to bring the default level of UK domestic pension investment closer to that of international competitors, with analysis suggesting that, by 2030, overall investment in UK equities by DC pensions would increase by around £76bn from current levels in today’s money (+230 per cent) and potentially as much as £95bn.

"This would be a vital boost to the economy and help to crowd in further capital, creating a virtuous circle," the letter stated, suggesting that this could be applied across both public and private equities and indeed all asset classes in which a pension fund invests.

The letter said that taking action would also be in line with the perceptions of the British public, highlighting a recent poll commissioned by New Financial, which found that the public believes 41 per cent of their pension is invested in UK companies or the UK stock market – 10 times the current level of investment.

Moreover,  72 per cent would support government action to encourage more domestic investment through their pension schemes.

The letter, led by London Stock Exchange Group chairman, Don Robert, and CEO, David Schwimmer, received support from a wide range of UK business leaders, including representatives from Barclays, Anglo American, Compass Group, JD Sports Fashion, Associated British Foods, Mitchells & Butlers, THG Group and many more. 

It stated: "We recognise that the policy options available to this government all have political and economic considerations.

"In our recommendation, we have considered what would be both practical to implement and effective in achieving the intended policy outcome. This recommendation can be achieved through minor amendments to the Pensions Bill 2025, the Investment Regulations 2005 and the Financial Conduct Authority COBS.

"Importantly, in a time of tough fiscal choices, this proposal would not require additional government expenditure and would result in material investment in the UK, directly supporting economic growth and allowing British savers to share in the nation’s success.

"Now is the time to back ourselves, ensuring British companies have the capital they need and that British savers benefit from the growth they help create. We urge you to act decisively, securing prosperity for generations to come."

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