Home Estate Planning Why TfL’s pension scheme is a symptom of Britain’s investment malaise

Why TfL’s pension scheme is a symptom of Britain’s investment malaise

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Transport for London has a £15bn pension pot – but just 0.5 per cent of it is invested in UK stocks.

That puts the pension scheme’s domestic equity allocation lower than every other category listed in the fund’s annual report, including overseas equities (32.6 per cent), private equity (7.5 per cent), and even renewables (0.6 per cent).

“[It is] the lowest I have seen in any comparable scheme,” wrote William Wright, boss of City think tank, New Financial.

A decade ago, its allocation to UK equities was eight per cent and 20 years ago it was 39 per cent.


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Darius McDermott, managing director of Chelsea Financial Services, explained that the under-investment in UK equities by TfL was an example of “a wider problem.”

British pension schemes have reduced their overall exposure to UK stocks from more than 50 per cent 25 years ago to just four per cent now.

“Can you imagine how well the market would do if they moved to say 10 per cent over a 3-5 year period?” added McDermott. “This would be a big boost to the UK market and we have been advocating this for a while now.”

Overall, UK pensions have gone from being net buyers of around £10bn a year to net sellers of around £30bn a year in real terms, pushing down the price of UK stocks.

“We are the only developed country in the world behaving like this,” Andrew Craig, founder of Plain English Finance told City AM.

“The downstream impact of this has been utterly ruinous to our economy – and will continue to be unless we can turn the proverbial ship around.”

Wright said that over the past decade the “TfL scheme has reduced its exposure to UK equities in real terms by nearly £700m”.

“I have no idea what TfL’s allocation to UK equities should be, but I sense that 0.5 per cent is on the low side,” he added.

Since coming to power in July, Labour ministers have accelerated efforts to unlock a wave of capital from the pension system to fund their growth plans.

At her maiden Mansion House speech last week, the Chancellor Rachel Reeves revealed proposals to merge the UK’s £350bn local government pension scheme, in a move she claims could spur some £80bn investment into the domestic economy.

TfL has been contacted for comment.

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