UK Pension Funds Required to Disclose Domestic Investments Amid Market Struggles

In an effort to reinforce the weakening UK stock market, Chancellor Jeremy Hunt announced a new directive on Saturday that will compel UK pension funds to be transparent about the extent of their domestic investments. This announcement comes at a critical time when the UK equity market is experiencing significant challenges.

New Disclosure Rules for Pension Funds

Under the newly introduced rules, by the year 2027, defined contribution pension funds will be required to disclose their investment levels in UK-based businesses, along with detailing their operational costs and the net investment returns they've achieved. This push towards transparency is aimed at encouraging investment into the UK economy. The Financial Conduct Authority is set to review the proposal before it is implemented.

Performance Comparison and Regulation Measures

Additionally, pension funds will need to reveal how they stack up in performance compared to their competitors. To maintain a healthy financial market, regulators will have the authority to prevent underperforming funds from acquiring new business.

Julia Hoggett, the CEO of the London Stock Exchange, has expressed her support for the initiative. She highlighted the mutual benefits for both the companies and the economy when pension funds invest in UK firms, stating that it aligns with the wider interest of pension holders and the country's economic well-being.

Concerns Over UK Market's Attractiveness

The requirement for greater investment transparency stems from concerns about the UK market's waning allure. Notable companies, such as CRH and FanDuel owner Flutter Entertainment, are shifting their primary listings away from the UK to the US. Similarly, British chip design powerhouse ARM Holdings has decided on a New York listing as it re-enters the stock market.

Charles Hall, the head of research at Peel Hunt, described the UK as an 'orphan market.' He noted that the allocation of pension fund assets in UK-listed companies has steeply fallen from 44% in 1998 to just 4% currently. Hall has previously recommended that pension funds should openly state their investments in UK equities and suggested fiscal incentives that have not yet been adopted, such as reducing the capital gains tax on such investments.

pensions, disclosure, investment