‘Disastrous for Britain’: how MPs’ pension fund left the UK stock market

Jeremy Hunt and Rachel Reeves have taken on the UK pensions sector in recent months, with threats against strong money managers to back home-grown British companies.

However, data suggests they would do well to start closer to home.

MPs’ pension fund – the Parliamentary Contributory Pension Fund (PCPF) – which pools MPs’ pensions and counts Treasury Select Committee chairwoman Harriet Baldwin among its trustees – has been rapidly offloading UK shares over the past seven years .

At its peak in 2017, the fund held £130m of UK shares. However, by the end of last year this had fallen by 92 percent to just £10 million.

This equity position represents a 1.3 percent weighting to UK equities of his total and just 2.3 percent of his total equity portfolio. This means the fund has dramatically shifted its allocation to foreign stock markets, said Peel Hunt, who analyzed the data.

The figures are likely to embarrass lawmakers in Britain, who have been beating the drum for more domestic investment in Britain in recent years. At his March Budget, Chancellor Jeremy Hunt outlined plans to force domestic pension funds to reveal the geographical composition of their investments by 2027, in a bid to boost domestic investment.

However, MPs’ pension pot figures suggest Westminster’s own pension fund could fall below the average UK allocation.

“This means that not only has the fund sold its UK holdings to very low levels, but it is also significantly underweight the UK share of global equities,” said Charles Hall, head of research at Peel Hunt.

“In some ways it is similar to Coutts’ decision to move to a global allocation of funds. It might work for them, but disastrous for Britain!”

Coutts pulled his money out of Britain earlier this year. Hall added that most MPs would probably be ‘surprised’ to realize how little their pension pots were invested in UK shares.

Pension investment has become a political football between the two sides as Westminster looks to encourage a wave of investment in the London Stock Exchange and Britain’s start-ups.

A capital pool of almost £2.5 trillion locked up in the funds is seen as a potential game changer in solving London’s public market malaise. Following accounting changes in 2000, pension funds dramatically fled the UK stock market in favor of safer bonds.

According to the think tank New Financial, only four percent of British shares are now owned by pension funds, compared to 39 percent twenty years ago.

In its manifesto yesterday, the Labor Party suggested it would continue the government’s push to shake up domestic pension investment, something left out of the Tory manifesto.

Last year the Conservative government forced 10 of the city’s top pension money managers to allocate five percent of their assets to British growth companies, a move Rachel Reeves had previously supported.

“Labour supports the direction taken from the Conservative Mansion House speech – which seeks to encourage UK pension funds to invest in UK assets – something not mentioned in the Conservative Manifesto,” said Adrian Kennet, director of Dalriada Trustees .

The Treasury Department did not immediately respond to a request for comment.